
Class ?0 

Book - T BS 

Copyright N° 

COPYRIGHT DEPOSIT. 



TRUSTS 

versus 
The Public Welfare 



TRUSTS 



versus 



The Public Welfare 



By H. C. RICHIE 



■ • » o 



i .> *• ->o 



• •, :'; •'- 



R. F. FENNO & COMPANY 

9 & 1 1 East i 6th Street, New York City 
1904 



LIBRARY of CONGRESS 
Two Copies Received 

APR 11 1904 

k Copyright Entry 

J-jJlf. %•*•-> 1.0^ 
CLASS Co XXc. No. 

COPY B 



Copyright 1904. 

by 

R» F. Fenno & Company 



Taunt. 



TRUSTS 

VERSUS 

THE PUBLIC WELFARE. 



The greatest menace to the public welfare now 
confronting our people is the formation and op- 
eration of the great industrial combinations com- 
monly called trusts, whose purpose is the regula- 
tion of production, wages, and prices, and the 
destruction of competition to the end of com- 
plete monopoly of the business of the country. 
There is not one of the great combinations but 
is bending its every talent, energy, and power to 
obtain supreme control of every market within our 
boundaries to give it an outlet for its wares, and 
there is not one of them that does not exhibit a 
marked determination to extort the highest 
price that can be gotten for its goods without 
encouraging by extreme prices the building and 
operation of new independent plants and renewal 
of competition. That fear of the fixing of too 



8 Trusts versus The Public Welfare. 

extravagant prices to invite competition has in- 
fluence to hold the trust magnates in check from 
extortion to the uttermost is remarked in the 
testimony of Mr. Henry 0. Havemeyer, presi- 
dent of the American Sugar Refining Company, 
before the Congressional Industrial Commission 
on the 14th day of June, 1899, when he said : 
" I think it fair to get out of the consumer all 
you can consistent with business propositions. 
As a business proposition it is right to get all out 
of business you possibly can." Which means 
the trust magnates regard consumers as their 
legitimate prey, and intend to exact from them 
the highest prices they possibly can consistent 
with the proposition of not making them so 
high that outsiders will be emboldened to build 
and operate manufactories and bring their prod- 
uct into competition with trust manufactures 
and thus prevent them from plundering the 
people. 

Theorists contend that commercial and indus- 
trial combinations, or trusts, are the result of 
business evolution, later day economic require- 
ments ; that aggregated capital represented by 
them is necessary to minimize cost of production 
and to that end individual effort and capital 
must make way for the greater power. They 



Trusts versus The Public Welfare. 9 

imagine combination productions are sold at less 
price than our individual manufacturing firms 
and corporations got for the same wares before 
trusts came into being, and that they will have 
sale in foreign countries to an extent to over- 
shadow our exportations of manufactures in pre- 
vious years to abundantly compensate us for the 
stifling of individual effort of our forceful enter- 
prising citizens who built up and maintained our 
manufacturing industry to establish us, more than 
thirteen years ago, the foremost manufacturing 
country in the world, the product of whose factor- 
ies and workshops was equal in value to the manu- 
factures of Great Britain, Germany and France 
combined, and who established and extended our 
foreign trade in domestic manufactures and 
placed their goods before our own people and the 
people of foreign countries at lower prices than 
quoted by the trusts at any time. They dream 
dreams that foreign manufacturers cannot main- 
tain themselves in competition with our trust-made 
goods when it is evident to practical men that the 
proposition is absurd save only in a very few lines 
of production in which the advantage has lain 
with us for many years. Markets are not surren- 
dered by people possessing them as necessary out- 
lets for the surplus products of their factories even 



io Trusts versus The Public Welfare. 

if the competition for their control is of a nature to 
deprive their possessors of profit on their wares. 
After all, these dreamers, while dreaming won- 
drous results have been achieved by the trusts in 
crushing individual endeavor and depriving our 
capable, energetic and skilful people of the 
means of employment and advancement, are evi- 
dently ignorant of what has been accomplished by 
the trusts in the matter of exportation of their 
manufactures to foreign countries and the bane- 
ful effect of their control of our manufacturing 
industry upon both foreign and domestic trade. 

I deny that conditions have changed, or are 
changing, to make necessary the formation of the 
combinations that have come into existence since 
January, 1899, to conduct our manufacturing busi- 
ness, and that only by means of the great wealth 
they control can the minimum cost of production 
be attained, and that they are a more important 
factor in the distribution of the products of our 
factories to foreign countries than were our indi- 
vidual manufacturing concerns. The history of 
the years prior to the absorption of our indepen- 
dent manufacturing firms and corporations by 
the great combinations disproves every word of 
such averment ; it shows the successful upbuild- 
ing of manufacturing establishments all over this 



Trusts versus The Public Welfare. n 

country, the employment by our manufacturers 
of millions of wage-earners who were paid a high 
rate of wages and had steady work ; the enor- 
mous expansion of the industry and the constantly 
growing consumption of our manufactures in the 
home market, and greater demand year after year 
from foreign countries for the products of our 
mills and furnaces. 

FORMATION OF INDUSTRIAL COMBINATIONS, AND 
THE RESULT. 

During the year 1899 combinations were 
formed in which there were merged a great num- 
ber of the principal manufacturing concerns of 
the country. The capitalization of combinations 
that year exceeded the sum of three billions of 
dollars over one half of which did not possess one 
dollar intrinsic value but was expected by the 
combination organizers to participate in net earn- 
ings, as the officers and managers of the various 
companies would be required to conduct their 
business in a manner to force a high percentage 
of profit to pay dividends on all stock. To effect 
this prices had to be, and were, largely advanced ; 
the American consumers had to pay the full ad- 
vance and thus contribute their pro rata of divi- 
dends on stock of fictitious value, while the 



12 Trusts versus The Public Welfare. 

people abroad who were not compelled to buy of 
us reduced their purchases of our trust-made 
goods. Instead of larger sale of American manu- 
factures to foreign countries since the merging of 
our individual manufacturing firms and corpora- 
tions into great combinations the record shows 
reduced sales to them. Our exportations of manu- 
factures attained their maximum amount in the 
fiscal year ending June 30, 1900, without appre- 
ciable effect upon the foreign demand because 
of combination management and control which 
had just been inaugurated. During each suc- 
ceeding year thereafter, to this date, with the 
trusts in perfect working condition; with vast 
capital at their command; with the superior 
management they claim to have ; with the great 
economies they declare they have introduced in 
their business, and with the unequaled facilities 
of production and distribution they affirm they 
possess, our exports of manufactures have steadily 
declined to $23,342,583 less for the fiscal year 
1901, to $30,210,355 less for the fiscal year 1902, 
and $25,664,549 less for the fiscal year 1903, 
or a total loss of sales to foreign countries 
of $79,217,487 of our manufactures during the 
past three years under trust management. Is not 
this enough to convince one that trusts have ob- 



Trusts versus The Public Welfare. 13 

structed rather than facilitated our business 
with foreign countries ? Thirty millions of 
dollars of manufactures represent the value of 
the product of the labor of tens of thousands of 
workingmen and with the loss of that much 
foreign business under the superior (?) manage- 
ment of trust people many thousands of working- 
men were deprived of employment during the 
fiscal year ended June 30th, 1903, a greater 
number were without work from the same cause 
for the year ending June 30, 1902, and a multi- 
tude of workers suffered in the same way during 
the fiscal year 1901. This meant a loss of many 
millions of dollars in wages, and many ills that 
follow in the wake of such a loss. 

I also deny that a combination, however great 
its capital, can manufacture at less cost than the 
same character of goods can be produced by the 
individual manufacturer if he has sufficient capital 
in his business to enable him to conduct it properly, 
and the cost of raw materials, supplies and labor 
are alike to both. The contrary of this has not 
yet been demonstrated, nor can it be, as the in- 
dividual manufacturer was as quick to avail him- 
self of improved machinery and highly skilled 
workmen as is the trust, and besides this, its being 
his own factory his best thought, knowledge and 



14 Trusts versus The Public Welfare. 

experience were applied to produce the best re- 
sults. As the larger part, if not all, of his capital 
was invested in the one factory the stake was so 
great that he was naturally driven to use every 
talent he was possessed of to make his business 
successful and profitable ; to that extent the 
individual manufacturer had some little advantage 
over a combination managed by numerous officers, 
stockholders and salaried people. 

REMARKS ON IRON ORE. 

As the United States Steel Corporation and its 
constituent companies own and control not less 
than 85 per cent, of the iron ore in the developed 
mines of the Northwestern States and fix an ex- 
cessive price for that ore, and for every ton of 
iron ore mined in that region by independent 
mine owners who promptly adopt the price 
established for trust ore as they know their busi- 
ness would be destroyed if they sold at a lower 
price, and as the independent furnace operators 
must have this Northwest ore to produce the pig- 
iron they supply the independent iron and steel 
manufacturers, the combination has an insuperable 
advantage and can undersell the independent 
manufacturers in this particular unless they sacri- 
fice a large part, or all, of the profit they had ex- 



Trusts versus The Public Welfare. 15 

pected to realize in meeting the cut price of their 
powerful opponent. The difference in cost of the 
higher product occasioned hy owning so great a 
percentage of ore as is owned by the trust is 
sufficient to give it absolute command of the 
market at a profit on prices that competitors not 
so fortunate in ownership of ore cannot meet 
without sustaining loss. This condition of own- 
ing and controlling a vast percentage of Lake 
Superior ore gives the combination the power of 
monopoly in the sale of iron and steel manufactures 
and impresses one with the supreme importance 
of our independent iron manufacturers owning or 
controlling mines from which they can obtain 
their supplies of ore to free themselves from de- 
pendence on the steel trust and ore miners acting 
in harmony with it. 

If the merging of iron ore mining companies 
into one great corporation had not occurred there 
would not have been for about two years past, 
and at present, a uniform and excessive price for 
the Lake Superior ore, and all of our iron and steel 
manufacturers could obtain supplies of that ore 
upon or near the same price level and turn out the 
finished product at about, or near, the same cost, 
thus insuring a fair and reasonable price to consu- 
mers and making impossible the monopoly of mar- 



16 Trusts versus The Public Welfare. 

kets. If such a condition prevailed the markets 
of our country would be open to all of our iron and 
steel manufacturers whose competition for busi- 
ness would do away with the oppression of immo- 
derate prices while the liberal demand for their 
manufactures would insure them the legitimate 
profit they are entitled to receive. A greater 
number of furnaces and rolling mills would be in 
operation, and many thousands of working people 
not now employed would have steady work in 
mining ore, in mining coal for making coke to be 
used in the furnaces to smelt the ore, in produc- 
ing the coke, in converting the ore into pig-iron, 
in the manufacture of the pig-iron into higher class 
products at the rolling mills, and with the trans- 
portation lines carrying the ore to the furnaces, 
the coal to the coke ovens, the coke to the 
smelters, the pig-iron to the rolling mills, and lastly 
the distribution of the products of the rolling 
mills to dealers and consumers. And these men 
would have received as high wages as the combina- 
tion now pays, probably higher wages than it 
pays, as the law of supply and demand obtains 
with labor as it does with commodities. 

Our importations of pig-iron that will amount 
to a million tons costing between 17 and 18 
million dollars by the end of the fiscal year, June 



Trusts versus The Public Welfare. 17 

30th, and our imports of a million tons of iron 
ore valued at more than two million dollars for 
the same period, proves conclusively that several 
thousand additional wage-earners would have had 
employment, as indicated, under the conditions of 
competition which would have stimulated develop- 
ment of the manufacturing industry, and brought 
about the production of iron ore and pig-iron 
that would have been required by our iron and 
steel manufacturers. 

The lamentable condition of trust monopoly of 
the iron ore of the Northwest and the invincible 
position the trust holds in the manufacture of 
iron and steel and its power to fix prices in con- 
sequence of that monopoly can and will be modi- 
fied by repealing the duty on iron ore. The repeal 
of the duty will cause the miners of Canada, Cuba 
and other countries to send large supplies of ore 
to relieve our independent iron and steel manu- 
facturers of the burden of extortion they are now 
bearing and incite them to enter the market with 
the product of their mills and furnaces in active 
competition with the trust with some assurance 
of a fair profit for themselves and reasonable 
prices for the people. Upon the repeal of the 
duty fictitious prices established by the trust for 

iron ore will largely disappear and its power to 

2 



18 ' TrUStS Versus The Public Welfare 

S^s, except STTa™*, M t ° f ""> *»&<! 

landed to re ,fe v f °f e *f f' " "*»* 
Pnces, a „d Senators and R ! P monopoly 

g'ess should be cal fed „ E ! prese,lto «™s in Con- 
e»d at the earlfe^t" "" ""^ <° ** 
gTOs again convenes a'?^ m ° ment after C °°- 
snonld he withdraw' ^ ^ <* electors 
the repeal. The a „.£ 7 ° refnse *° ™te 

•*— and breah„r t tV' *"?** «— 
capital lays witi the ° le °?l "legated 
-7 whether or not l^nt £ "J" *» to 
of our country is to cease „ " resources 

dividual enterprLTe If T beha ">Pered, 
f- g htt„acondu?o» b ftXde "' "? '^ 
tmts may reap fabulous ZZt "S" *** 
dends on their stock of tT u Pay b « *«- 
billion dollars are „„? wh,ch »ore than two 
^orphysic.,"^^ ^adolfer of 

The time is at hand ^ 
to the dangers conft; genemI aTOfe eniug 

of the busing oft S ™ '" ""> abs °Ttiof 

t% We bu! ; e ^£f * -^L, 

ooject m view and that is 



Trusts versus The Public Welfare. 19 

monopoly. About all lines of important manu- 
facture have been merged into powerful combi- 
nations, each under the direction and management 
of one set of general officers. The work done at 
each plant of the corporation is required to be 
reported daily, comparison is made with similar 
work and production at other plants and the one 
showing the largest production, which carries 
with it the least cost of wares produced, is 
adopted as the standard and thereafter all must 
come up to it or they will be held in disfavor. 
A task system is thus inaugurated and woe to 
the man or to the factory that fails to reach the 
standard ; the working-man falling short of his 
task is discharged or reduced to a subordinate 
place, and the plant that fails to come up to what 
is required of it in magnitude of production and 
minimum of cost of goods turned out is shut 
down and dismantled. As the working-men of 
the closed factory had not fulfilled the tasks that 
had been allotted them they are barred from em- 
ployment in trust mills. Where else can they apply 
for work they are skilled in performing ? The few 
independent mills have their complement of hands 
and employment cannot be had in them. The 
situation of these idle workmen is appalling, they 
are powerless to better their condition. Are 



20 Trusts versus The Public Welfare. 

these men who are skilled in mechanical pursuits 
or other employment of high rank to be forced 
to become street-cleaners, hod-carriers or farm 
laborers to earn a pittance to keep want from 
their homes? This is a condition far from 
pleasant to contemplate, but thought must be 
given to it ; to a certain degree it is an actuality, 
it is apt to be more pronounced in the not very 
distant future unless some powerful restraint is 
exercised over industrial combinations. 

CLOSING AND DISMANTLING OF PLANTS. 

Trust magnates have shut down many plants 
because of failure to turn out a product equal in 
amount and lowness of cost of some selected fac- 
tory or mill and kept them closed for an indefi- 
nite period. They have dismantled a number 
of plants for the ostensible reason that their lo- 
cation was not regarded favorable for economic 
operation, but in many instances for the pur- 
pose of restricting production and centering 
manufacture at a few favored places. A case in 
point was the closing of a plant belonging to 
and operated by the American Tin-Plate Com- 
pany, a constituent company of the United 
States Steel Corporation, who were not satisfied 
with the output of the mill and the cost of its 



Trusts versus The Public Welfare. 21 

product, as they fell below the company's require- 
ments as fixed by the standard mill. Mr. Wil- 
liam Griffiths, referring to this occurrence in 
his testimony before the Industrial Commission 
in November, 1899, said that a delegation of 
working-men from the Cumberland, Maryland, 
tin-plate mills, after it had been shut down, 
called upon the general manager of the American 
Tin-Plate Company with a petition to start the 
mill up. The reply of the general manager to the 
delegation was : " If you can in any way give 
the company a concession of ten cents a box, 
which is the amount necessary to put you on an 
equality with New Castle, your mill will be re- 
stored." 

Because a mill 200 miles distant could produce 
a box of 100 pounds of tin-plate at one-tenth of 
a cent per pound less cost than it could be made 
for at Cumberland the working-men at that plant 
were deprived of employment, to endure hardship 
and suffering until disciplined to concede the de- 
mands of the trust. It happens to be within 
the power of a trust to discipline its force of 
working people when in the course of events it 
may deem it necessary ; its plants are located in 
many places and to accomplish its ends one here, 
another there, and still another somewhere else 



22 Trusts versus The Public Welfare. 

can be shut down and manufacture concentrated 
in other plants. After a long time of idleness, 
in which possibly the savings of years are con- 
sumed in maintaining the family, and after many 
hardships have been endured, almost any sort of 
agreement can be reached and then work is re- 
sumed. The same tactics can be employed in 
disciplining the working-men in the various plants 
of the trust until all are in a frame of mind ut- 
terly submissive to the behest of their employer. 

Possibly a few of the working-men in plants 
ordered dismantled had proved themselves ca- 
pable to fulfil all that was required of them by 
the trust ; if so, they were offered work in mills at 
distant points the acceptance of which made nec- 
essary the removal of their families to the new 
location, and the breaking off of lifelong friend- 
ships and associations. A very trying and un- 
happy experience that one is loath to pass 
through. 

INDIVIDUAL MANUFACTURING FIRMS AND COR- 
PORATIONS. 

When the manufacturing plants now in com- 
binations were owned and operated by individual 
firms and corporations the employer had direct 
interest in the welfare of his employees and in 



Trusts versus The Public Welfare. 23 

their being kept in the fullest possible employ- 
ment, only in case of actual business stagnation 
and large accumulation of manufactured goods 
would he consider the shutting down of his fac- 
tory and when it occurred he exerted himself to 
dispose of his surplus manufactures and with 
their sale he was quick to resume manufacturing. 
When the day of resumption of work came the 
place of every old employee was open for him, or 
her, this as a matter of course ; as long as the 
mill stood the hands knew they had a certainty 
of employment in it if their employer could find 
sale anywhere for the product of their labor, and 
from one end of this land to the other, except 
upon rare occasions, our working people in the 
manufacturing industry had regular employment 
at liberal wages and were void of fear of the mill 
being shut down and dismantled because of some 
other mill making some article at a trifle less cost 
than it could be produced for in their mill. 

Before the formation of great combinations in 
the manufacturing industry factories of every kind 
were being built and put in operation throughout 
the country. The starting up of these new plants 
made a demand for more working people and added 
to the possibilities of higher wages, at the least it 
insured the maintenance of a high scale of wages. 



24 Trusts versus The Public Welfare. 

Our active enterprising individual firms and corpo- 
rations encouraged in the broadest sense the devel- 
opment of our natural resources by which the best 
interests of the country were promoted ; they gave 
a liberal market for the cotton, wool and other raw 
materials produced by our farmers, as there were 
many buyers of such things, and for the coal and 
ores taken from the earth, and the timber from 
the forests. A multitude of people were em- 
ployed in producing these materials and in mining 
the coal and ore. The building of the various 
factories required the services of many thousands 
of masons, carpenters and other workmen, and 
much carrying by our transportation lines. Thou- 
sands of homes were brightened, and tens of 
thousands of hearts gladdened by the building 
and operation of our individual manufacturing 
establishments, and communities were prospered 
by their building. 

It is well known that prosperity abounds when 
labor is fully employed, and that full employment 
is contingent upon an active prosperous manu- 
facturing industry. A condition of fully em- 
ployed labor at higher wages than paid in any 
other country in the world, and unparalleled pros- 
perity attended us continuously for eighteen years 
to the beginning of 1893 when every branch of in- 



Trusts versus The Public Welfare. 25 

dustry and business was laid prostrate by fear of 
the institution of certain destructive national 
policies. The inauguration of the threatened 
and dreaded policy one year later intensified the in- 
dustrial and general business paralysis to cause it 
to continue until the end of 1896, filling the land 
with a mighty army of idle wage-earners, bank- 
ruptcy, distress, and want. The year 1897 
opened with confidence restored in the certainty 
of the prompt repeal of laws that had brought 
disaster upon us and early restoration of policies 
that had always prospered us. Mills opened wide 
their doors for the return of their old employees ; 
mining operations were resumed on a large scale as 
coal and ore were required by manufacturers ; 
transportation lines were soon busily employed in 
the movement of a vast commerce ; every avenue 
of employment was opened and the idle ones 
were given work to do ; distress and want were 
quickly banished from this great country, where 
they were not wont to abide. Before July 1, 
1898, marks of unexampled prosperity were upon 
every hand, labor was universally employed, every 
branch of manufacture was being operated to its 
fullest capacity ; our transportation lines were 
unable to promptly move the freight delivered to 
them; new mills and furnaces in course of con- 



26 Trusts versus The Public Welfare. 

struction fairly dotted the land, and foreign 
countries were buying more of our manufactured 
goods than ever before. The year closed with 
demands for manufactures beyond the power of 
existing plants to produce, and with a volume of 
general business more than six billions of dollars 
greater than was done in any previous year in the 
history of our country. In the meantime, that 
is from January 1, 1893, to January 1, 1899, there 
was an enormous addition to the money in cir- 
culation which encouraged a spirit of irrational 
speculation in stocks and other securities then 
listed upon the Exchange, and invited daring 
operators and speculators to create new stocks to 
unload upon credulous investors. The merging 
of our prosperous manufacturing firms and cor- 
porations into great combinations with fabulous 
stock capitalization was the result of the enormous 
expansion of the currency and the spirit of specula- 
tion it inspired. The organizers of combina- 
tions had faith in their stocks being readily taken at 
satisfactory prices when placed upon the market, 
as persons purchasing them would believe that 
under trust management the earnings of the 
business would be great and high value would 
attach to the stock. This view of the subject 
was confirmed by Judge William H. Moore, one 



Trusts versus The Public Welfare. 27 

of the most successful organizers of big combina- 
tions, who in his testimony before the Industrial 
Commission, said : " The stock of all the com- 
panies I have organized has sold, the two to- 
gether, preferred and common, at 40 to 50 or 60 per 
cent, premium, and even higher within a reason- 
able length of time." 

It is a well-known fact, and in evidence, that 
the trusts, or combinations, issued from two to four 
dollars, and in several instances nine dollars, of 
stock for one dollar of actual property merged, and 
as high as twenty dollars of trust stock was issued 
for one dollar of tangible assets, therefore the 
premium indicated by Judge Moore paid the 
original holders of the stock a splendid profit to 
satisfy them for surrendering their property to 
the combination. 

THE NATURE AND PURPOSE OF COMBINATIONS COM- 
MONLY CALLED TRUSTS. 

The following pages will show somewhat of the 
nature and purpose of the great combinations or 
corporations, commonly called trusts, that are 
monopolizing the business of the country, and 
the pernicious effect of their existence upon our 
individual and national well-being. The brief 
summary I advance of the testimony of each wit- 



28 Trusts versus The Public Welfare. 

ness examined by the commission should be 
thoughtfully read and seriously considered to 
arrive at a proper understanding of what is 
necessary to be done to remedy the trust evil. 
It is neither practicable nor wise to adopt measures 
to suddenly break up and destroy these powerful 
combinations as the effect would be disastrous in 
the extreme, and too far-reaching, but it is es- 
sential, and the best interests of our people de- 
mand, that drastic laws be enacted by Congress 
for their control and regulation. 

Under authority of an act of Congress approved 
June 18, 1898, a commission entitled the " Indus- 
trial Commission " was appointed to investigate 
combinations or trusts, and report from time to 
time to Congress the information elicited with a 
view to suggest a course for that body to pursue 
in framing laws for the regulation and control of 
all corporations or combinations engaged, or that 
may engage, in commerce among the States and 
with foreign countries. Meetings of the commis- 
sion were held in 1898 and succeeding years to the 
end of 1901, and possibly since, when trusts, or 
combinations, magnates, officers, directors, organi- 
zers and promoters, and bankers who were mem- 
bers of syndicates that advanced money for com- 
bination purposes appeared and gave in their 



Trusts versus The Public Welfare. 29 

testimony in regard to the formation and opera- 
tion of the combination in whose name they were 
summoned as to the persons organizing it, its 
capitalization and in what form, the names and 
location of the various companies merged into it, 
their individual capital stock, the character and 
value of their properties, the terms upon which 
their stock and property were acquired, and all 
other information upon the subject that could be 
gotten from them that would reveal the status 
and workings of this new corporate power created 
for the purpose of crushing competition and mo- 
nopolizing the production and sale of the manu- 
factures of the country. 

THE UNITED STATES STEEL CORPORATION. 

The first in order to present of the great in- 
dustrial combinations, on account of the magnitude 
of its capital stock and business, is the United 
States Steel Corporation, which was organized 
February 23, 1901, under the laws of the State 
of New Jersey. This corporation, composed 
of eleven constituent companies, is capitalized 
at $1,404,000,000, consisting of $550,000,000, 
7 per cent, cumulative preferred, $550,000,000, 
common stock, and $304 ; 000 ; 000, 5 per cent. 



30 Trusts versus The Public Welfare. 

gold bonds. There was issued of this capital 
stock $510,280,900, preferred, $508,302,200, 
common stock, and bonds to the amount of 
$303,757,000, a total of $1,322,340,300, with 
which to purchase the stocks, bonds, and pro- 
perties of the various companies that were 
brought into the combination, to secure working 
capital to the amount of $25,000,000, and for 
other purposes. The remainder of the capital 
stock was retained in the treasury for future 
uses. 

The largest and most important of the com- 
panies absorbed by the United States Steel Cor- 
poration was the Carnegie Company, with its 
extensive holdings of subsidiary companies, whose 
capital stock and bonds of $320,000,000, were 
purchased at a valuation of $492,313,000, and 
paid for in stocks and bonds of the corporation. 
This premium of $172,313,000, paid for the capi- 
tal stock and bonds of the Carnegie Company, 
was the beginning of the immense over-capital- 
ization of the United States Steel Corporation, 
which is apt to wreck it in the course of a very 
few years, upon which dividends must be exacted 
of consumers of the products of its mills and fur- 
naces. Next in rank of the merged companies 
stands the 



Trusts versus The Public Welfare. 31 

FEDERAL STEEL COMPANY. 

The Federal Steel Company caine into exist- 
ence about two years before the United States 
Steel Corporation was organized ; it was formed 
under a charter granted by the State of New 
Jersey that authorized it to do business anywhere 
in America or in foreign countries. Stock was 
issued to the amount of $100,000,000, of which 
$53,500,000 was preferred and $46,500,000 was 
common. This stock was used to acquire the total 
stock issue of five iron and steel companies and a 
short railroad, amounting to $55,150,000, to ob- 
tain $14,000,000, cash working capital and for 
other purposes. The stock of one of the iron 
companies was purchased by payment of $200 of 
Federal Steel Company stock for $100 stock of the 
iron company, and the stock of the other absorbed 
companies was purchased at premiums ranging up 
to near fifty per cent. The $100,000,000 capital 
stock of the Federal Steel Company was purchased 
by the United States Steel Corporation by the 
exchange of $110 of its preferred and $4 of its 
common stock for $100 of preferred stock of the 
Federal Steel Company, and $107.50 of common 
stock of the United States Steel Corporation for 
$100 common stock of the Federal Steel Com- 
pany. In this transaction the Federal Steel 



32 Trusts versus The Public Welfare. 

Company received a premium of $11,097,750 
for its stock from the United States Steel Cor- 
poration. Add this premium to the excess sum, 
or premium, the Federal Steel Company paid 
when it purchased the stock of its six subsidiary 
companies and the gross amount would probably 
be not less than $50,000,000, which is now em- 
braced in the capital stock of the United States 
Steel Corporation. The " dear people " will pay 
dividends on this watered stock just so long as 
there is a liberal demand for iron and steel 
products, as the steel corporation will fix prices to 
that end. 

THE AMERICAN STEEL AND WIRE COMPANY. 

The American Steel and Wire Company was 
organized early in 1899 with capital stock of 
$90,000,000, consisting of $40,000,000, 7 per 
cent, cumulative preferred and $50,000,000, com- 
mon stock. Manufactures wire of all kinds, wire 
fencing of all kinds, wire nails, wire rods, etc., 
and produces probably 90 per cent, of the output 
in this country of wire nails, about 90 per cent, 
of all the barbed wire and fencing wire, and not 
less than 80 per cent, of the wire rods. 

There were a number of companies merged to 



Trusts versus The Public Welfare. 33 

form the American Steel and Wire Company 
whose property after the combination was com- 
pleted was estimated to be worth $46,000,000 to 
$50,000,000 at a fair cash valuation. There is 
no question about a large bonus of common stock 
having been paid to the subsidiary companies 
when they entered into this combination, and 
that the greater part of the capital stock of the 
American Steel and Wire Company was used in 
acquiring the property of those companies. 

When the American Steel and Wire Company 
was merged into the United States Steel Corpo- 
ration it received $117.50 of preferred stock of 
the United States Steel Corporation for $100 of 
its preferred stock, and $102 of the common 
stock of the United States Steel Corporation for 
$100 of its common stock. Thus the American 
Steel and Wire Company received a premium of 
$8,250,000 for its stock which added to the 
bonus paid by that company to the companies of 
which it was composed carries several tens of 
millions to the account of water in the capital 
stock of the United States Steel Corporation. 

THE NATIONAL TUBE COMPANY. 

The National Tube Company, whose capital 

stock was $80,000,000, divided into $40,000,000, 
3 



34 Trusts versus The Public Welfare. 

7 per cent, cumulative preferred and $40,000,000 
common stock, was absorbed by the United States 
Steel Corporation upon payment of $125 of pre- 
ferred and $8 of common stock of the United 
States Steel Corporation for $100 of the National 
Tube Company's preferred stock, and $125 of com- 
mon stock of the Steel Corporation for $100 of 
common stock of the Tube Company. In this pur- 
chase $103,200,000 of United States Steel Corpo- 
ration stock was given for $80,000,000 of National 
Tube Company stock, which shows a premium of 
$23,200,000 paid by the big corporation in the 
exchange of stock. 

THE NATIONAL STEEL COMPANY. 

The National Steel Company was organized in 
February, 1899, under the laws of the State of New 
Jersey with capital stock of $59,000,000, of which 
$27,000,000 was 7 per cent, cumulative preferred, 
and $32,000,000 common stock. The testimony 
in regard to the acquisition of the several plants 
combined in this corporation was that they were 
merged upon the basis of a cash valuation of 
each plant, and payment made of $100 preferred 
and $100 of common stock for $100 of property 
value; in other words, $2 of National Steel 
Company stock for $1 of property. When this 



Trusts versus The Public Welfare. 35 

company entered into the United States Steel 
Corporation it received $125 of preferred stock 
of the United States Steel Corporation for $100 
of its preferred stock, and $125 of common stock 
of the Steel Corporation for $100 of its com- 
mon stock, or a premium of $14,750,000. 
Consider this premium in connection with 
the 100 per cent, bonus paid originally for the 
properties by the National Steel Company and 
understand that the United States Steel Corpora- 
tion has issued stock to cover all of it. 

THE AMERICAN TIN-PLATE COMPANY. 

The American Tin-Plate Company incorporated 
January 6, 1899, under the laws of the State of 
New Jersey is an aggregation of nearly all the 
tin-plate companies in the United States. The 
merging of these companies, producing about 90 
per cent, of the output of tin-plate in America was 
at the instance of their stockholders who had 
suffered loss of a considerable percentage of 
profit for quite a period by competition that had 
prevailed ; they regarded a combination of the 
tin-plate interests the means by which full profits 
could be realized, and were eager to enter into 
it. There were a few tin-plate manufacturers 



36 Trusts versus The Public Welfare. 

who through bad management had failed to make 
a profit ; in a few instances mills were operated 
at some small loss, as has been the case at times 
in other lines of manufacture, but the majority 
of them were making money, " not a great deal, 
but some profit." There had not been a failure 
in the business from its start in 1891, nor has 
there been a failure in it to this date. 

A famous promoter was solicited by a committee 
appointed by dissatisfied stockholders to under- 
take the combining of the various tin-plate 
manufacturing concerns, and after an interval of 
some months he engaged to bring about what 
was desired, a formal contract was signed and 
near a year later, after having secured options on 
about 90 per cent, of the capacity of the mills of 
the country, he had them united in one organization 
known as the American Tin-Plate Company with 
capital stock issued to the amount of $46,000,- 
000, of which $18,000,000 was 7 per cent, 
cumulative preferred, and $28,000,000, common 
stock. In taking over the properties of the va- 
rious companies the owners were paid $100 of 
preferred and $100 of common stock of the Amer- 
ican Tin-Plate Company for $100 appraised cash 
value of their property. The testimony before 
the Industrial Commission shows that the pre- 



Trusts versus The Public Welfare. 37 

f erred and common stock at par that was paid 
for some of the plants that were absorbed was four 
times their cash value. 

In his testimony before the commission Judge 
Moore, the promoter of the combination, said : 
"The stock was taken by the tin-plate manu- 
facturers for their plants in preference to cash 
because they could get fifty or sixty points pre- 
mium for it within thirty or sixty days." 

The American Tin-Plate Company was ac- 
quired by the United States Steel Corporation 
upon the payment of $125 of its preferred and 
$20 of its common stock for $100 of preferred 
stock of the American Tin-Plate Company, and 
$125 of its common stock for $100 of the com- 
mon stock of the tin-plate company, or a premium 
of $15,100,000 paid by the steel corporation for 
the stocks of the tin-plate combination. Add to 
this the premium of 100 per cent., or more, stock 
payment above the actual value of the plants 
when they were merged in January, 1899, into the 
American Tin-Plate Company and see the vast 
over-capitalization of this constituent of the 
United States Steel Corporation. The price of 
domestic tin-plate is based on this capitalization, 
and must be established to earn dividends on the 
stock. 



38 Trusts versus The Public Welfare. 

THE AMERICAN STEEL HOOP COMPANY. 

The American Steel Hoop Company was organ- 
ized in April, 1899, under a New Jersey charter ; 
it manufactures everything in the line of light 
iron and steel hoops, bands, cotton ties, bars, 
round and half round, and about everything that 
is used in the manufacture of hinges and general 
hardware. There are nine plants in this combi- 
nation located in Ohio and Pennsylvania. The 
capital stock of the company was $33,000,000 of 
which $14,000,000 was 7 per cent, preferred and 
$19,000,000 common. In taking over this cor- 
poration the stock of the United States Steel 
Corporation was exchanged for the stock of the 
American Steel Hoop Company on the basis of 
par value for each stock. 

THE AMERICAN STEEL SHEET COMPANY. 

The American Steel Sheet Company was merged 
into the United States Steel Corporation by an 
exchange of stock on the basis of par value. The 
capital stock of the company was $49,000,000 
divided equally in preferred and common stock. 

THE AMERICAN BRIDGE COMPANY, 

whose stock issue amounted to $62,322,000, con- 
sisting of $31,372,000 preferred and $30,950,000 



Trusts versus The Public Welfare. 39 

common stock ; the Shelby Tube Company with 
stock issueof $5,000,000pref erred and $8,151,500 
common, and the Lake Superior Consolidated Iron 
Mines with capital stock of $30,000,000 were also 
merged into the United States Steel Corporation. 
The terms upon which the stock and properties 
of these three companies, and the American Steel 
Sheet Company were acquired were not made 
known to the public, but no doubt they were 
gotten, as were the stock and properties of the 
other companies mentioned, at from par to a high 
premium. 

REAL VALUE OF PROPERTIES MERGED INTO UNITED 
STATES STEEL CORPORATION. 

Thus the total stock and bond issue of the 
eleven companies composing the United States 
Steel Corporation is shown to be $882,473,000, 

As all of these companies, when merged into 
the great steel corporation, were combinations of 
companies and partnerships, and had paid extrav- 
agant prices for the property they had gotten 
possession of in order to bring them under one 
general management for the purpose of restricting 
competition with a view to getting higher prices 
for their manufactures, it is safe to say that the 
cash value of the properties merged into the 



40 Trusts versus The Public Welfare. 

United States Steel Corporation was not a dollar 
in excess of $550,000,000 on the books of the 
original companies and firms composing the 
constituent companies of the corporation* As a 
business proposition it is right and proper when 
establishing capital stock and estimating the worth 
of property owned by the company, to place a 
higher value upon the property than its original 
cost if the price paid for it is known to be below 
its actual worth. The buildings and machinery 
of the various companies had not increased in 
value after years of use. The lands upon which 
they stand, doubtless, in some instances may have 
increased somewhat in value but no material in- 
crease. I concede the ore property of the corpo- 
ration far more valuable than it was when it came 
into possession of the several companies and that 
some of the patents owned and controlled by the 
corporation possess considerable value. Granting 
all this in the most liberal disposition of mind, I con- 
ceive an additional amount of $250,000,000 ample 
to cover every deficiency, and hold that a legitimate 
valuation of the properties of the United States 
Steel Corporation does not exceed $800,000,000. 
Upon this estimate of the value of the properties 
of all kinds of the great steel corporation, based 
upon the testimony before the Industrial Com- 



Trusts versus The Public Welfare. 41 

mission in 1901 and from other reliable sources, 
an estimate that unprejudiced men must concede 
eminently fair, it is over-capitalized to the extent 
of $604,000,000. To realize net earnings to pro- 
tect this watered stock excessive prices must be 
established and maintained for corporation manu- 
factures, hence a great wrong is inflicted upon 
the people by the power it has to issue stock that 
is not upheld by tangible assets. 

Is there honesty of purpose in this system of 
over-capitalization? The just and thoughtful 
man holds to the contrary. In forming the 
great industrial combinations the owners of all 
the principal plants were visited and a proposition 
was made to each of them to pay two dollars or 
more of the stock of the new corporation for one 
dollar of stock or appraised cash value of their 
properties. Believing that the combination would 
be effected and that they would be impotent to con- 
tend with it in competition for business, and in- 
fluenced by the offer of payment of two or more 
shares of stock of the combination for one share of 
their own stock or property of like value, and 
persuaded that they could sell the new stock, as 
Judge Moore told the commission, at a premium 
of 50 or 60 points within 30 or 60 days and thus 
realize an inordinate price for the property they 



42 Trusts versus The Public Welfare. 

turned over, the proposition of the promoter was 
accepted. The owners of a majority of the re- 
maining plants were then approached and a propo- 
sition made to take over their establishments and 
holdings at prices ranging from par to a high pre- 
mium, and they, feeling their powerlessness to com- 
pete with factories combined and under one gen- 
eral management with vast capital to sustain them, 
were compelled to accept the offer made them. In 
that manner the merging of 80 or 90 per cent, in 
capacity of the manufactories of the country into 
powerful combinations was effected and the pos- 
sibility of effective competition done away with. 
The few remaining independent manufacturing 
partnerships and companies were thereafter dom- 
inated by the trusts, or combinations, in the fix- 
ing of prices, as they knew if they made lower 
prices for their wares than the trust had estab- 
lished for its manufactures a war of prices would 
be promptly inaugurated to their complete un- 
doing, that their customers would be taken from 
them and their business wrecked. A monopoly 
in a very broad sense was thus established. 

Of the $1,400,000,000 capital stock of the 
United States Steel Corporation $700,000,000 
is apportioned to iron ore in the ground ; $100,- 
000,000 to coal fields and coke property ; $300,- 



Trusts versus The Public Welfare. 43 

000,000 to mills, fixtures, machinery, equipments, 
tools and real estate ; $80,000,000 to transpor- 
tation properties ; $48,000,000 to blast fur- 
naces ; $20,000,000 to gas fields ; $4,000,000 
to limestone quarries, and $148,000,000 in cash 
and cash assets on June 1, 1902, making com- 
plete the amount of capital stock. 

Mr. Schwab, president of the corporation, 
stated in his testimony before the commission 
that the United States Steel Corporation owns and 
controls 80 per cent, of the iron ore of the North- 
west, and that there was hardly a reasonable 
limit to place upon its value " as the ore region 
is not likely to be extended," hence the fabu- 
lous value of $700,000,000 he places upon it. 

IRON ORE. 

Comparatively a few years ago, when not one 
half the ore that is now in sight was available, 
there were, doubtless, large mine owners who con- 
tended, like Mr. Schwab, that the supply of North- 
west iron ore was in limited quantity and that 
the field was not apt to be extended ; but with 
the passage of years and increased consumption 
and demand new fields were opened up to the 
present great annual output. Eef erring to the 



44 Trusts versus The Public Welfare. 

Northwest iron ore region and the possibility 
of its exhaustion of ore in a limited period as inti- 
mated by Mr. Schwab, Mr. Willis H. King, one 
of the principal officers of Jones and Laughlin, 
Limited, of Pittsburgh, next to the United States 
Steel Corporation the largest iron and steel manu- 
facturers in the United States, a gentleman who 
understands the requirements of the business he is 
engaged in and fully comprehends the iron ore sit- 
uation, said in his testimony before the Industrial 
Commission in 1901 that his firm owns enough 
ore in the Lake Superior region to supply their 
wants for the next twenty-five or thirty years, and 
added, " more ore will be found when needed, 
it will become cheaper. The Lake Superior dis- 
trict can supply ore for the steel manufacture of 
this country for the next 80 or 100 years. I 
would not like to put that limit on its being ex- 
hausted ; it is felt the ore will be found when 
needed." 

Mr. King would not go on record as expressing 
belief that the present developed mines of the 
Northwest would be exhausted in a hundred years ; 
as an observing man and practical steel manu- 
facturer he had no doubt abundant fields of ore 
would be discovered and opened up in the North- 
west when further supplies are needed. 



Trusts versus The Public Welfare. 45 

A thoroughly well-informed writer on the sub- 
ject of iron ore supplies in an article contributed 
in December, 1902, said : " There is no reason to 
doubt many mines will yet be found." As to 
mines now being worked he said : " One mine 
opened in 1894-1895 has shipped 7,500,000 tons. 
It can make similar or larger shipments for many 
years, and it is opened for enormous annual ship- 
ments. Many a mine that years ago was looked 
upon as near its end, as practically exhausted, is 
now a bigger property than ever, a larger annual 
producer and with more ore in reserve than at any 
time in its history. This has so often been the 
fact that it is a daring thing to predict the end of 
an ore body." Continuing his remarks this writer 
says : " Two years ago no Mesaba ore that as- 
sayed under 60 per cent, was considered fit to sell 
and no account was made of the vast tonnage 
often found running from 50 to 60 per cent. 
Millions of tons of ore running down to 55 per 
cent, have been shipped from the range this year 
(1902) together with large quantities from other 
ranges running down to 40 and 45 per cent in 
iron. There are hundreds of millions of tons of 
these ores in the lake region." It is to be re- 
marked that the last-mentioned ores are not in- 
ferior in the quality of iron they contain, but the 



46 Trusts versus The Public Welfare. 

percentage of metal they hold makes them a little 
more costly to use. Except outside of a few 
minor holdings the iron ore mines and properties 
of the Lake Superior region are in less than ten 
hands. Every new iron ore discovery in the lake 
region that promises fair to good output is bought 
up at once by the United States Steel Corporation, 
and from year to year its monopoly of North- 
west ores becomes more pronounced. Indepen- 
dent operators are now almost barred from pos- 
sessing any of that ore property. 

Six or seven years ago the ore of the* Lake 
Superior region was valued at 40 to 50 cents per 
ton in the ground, so stated by Mr. John W. 
Gates, chairman of the American Steel and Wire 
Company, in his testimony before the Industrial 
Commission, but since the United States Steel 
Corporation came into ownership and control of 
80 per cent, and more of that ore it has increased 
most wonderfully in value in the estimation of the 
officers and management of the corporation. One 
would infer from Mr. Schwab's remarks that this 
country is in great danger of being exhausted of 
its iron ore in the course of fifty or sixty years, 
and in consequence of its possible exhaustion in 
that period the ore now in sight should bring the 
most extravagant price; this to influence the 



Trusts versus The Public Welfare. 47 

public to believe that the extortionate prices that 
the corporation has demanded from consumers 
were warranted by high price of ore, and to in- 
spire confidence in the $700,000,000 steel cor- 
poration stock based upon ore in the ground. 
This ore that was valued at 40 to 50 cents per ton 
in the ground six or seven years ago sold at about 
$4.50 at the mines in 1902. 

Mr. Schwab also said to the commission that 
the United States Steel Corporation was a large 
seller of iron ore to the independent furnace men 
and iron and steel manufacturers, and owning the 
vast amount of it they do they are warranted in 
fixing a full price for it, and the price should not 
vary ; it should be maintained " under all condi- 
tions whether the price obtained for iron and steel 
is profitable or not." Any price named by the 
United States Steel Corporation for its iron ore es- 
tablishes the price for all Northwest ores, therefore 
the independent iron and steel manufacturers are 
compelled to pay for the raw material required in 
their business a price fixed by people they are 
competing with for the sale of the product of their 
mills. Under such a condition the United States 
Steel Corporation can sell its product at a small 
margin of profit, or even at cost, and realize fair 
net earnings on its business, as abundant profit 



48 Trusts versus The Public Welfare. 

comes in from the inordinate price of ore, while 
the independent manufacturers sustain material 
loss on every dollar's worth of goods they sell, and 
face ruin. A most remarkable proposition it is, 
to be sure, to inflexibly maintain a high price for 
raw material when the manufactured article is 
selling at a largely reduced price. And still there 
are some good and sensible people who think inde- 
pendent manufacturers are not in danger of being 
driven out of business by trusts, or combinations, 
that stand ready to use every means their fertile 
brains can devise to crush competition and mo- 
nopolize the sale of manufactures. Unless the 
trust magnates are halted in carrying out their 
schemes these shortsighted people will yet discover 
that monopoly is not a myth. 

Statements that there is danger of the exhaus- 
tion of iron ore in the United States is utterly 
absurd ; they are made solely to bolster up high 
monopoly prices. There is beyond question billions 
of tons of it yet to be developed in the North- 
western states, and other billions of tons of it in 
New York, Pennsylvania, West Virginia, Ohio, 
Kentucky, Missouri and in western states to the 
Pacific Ocean, and several southern states con- 
tain it in unlimited quantity. 

Mr. E. 0. Hopkins, president of the Sloss- 



Trusts versus The Public Welfare. 49 

Sheffield Iron and Steel Company, of Birmingham, 
Alabama, stated in his .testimony before the com- 
mission in 1901 that " there is practically an in- 
exhaustible amount of iron ore within a radius of 
twenty-five miles of our Birmingham furnaces, and 
the same is true of brown ore at the Sheffield and 
Florence furnaces." The Lake Superior ores con- 
tain a higher percentage of metallic iron than 
Southern ores, and in consequence are more valu- 
able, the lake region ores running from 40 to 60 
per cent, while Southern ores run from 35 per cent, 
up to limited quantities of 54 per cent., the best in 
the Birmingham district producing 38 per cent, of 
iron. 

Southern iron ore is valued at 25 cents per ton in 
the ground. Is there good reason for putting ten 
or twelve times that value on the ore in the ground 
that is owned and controlled by the United States 
Steel Corporation ? It is a well-known fact that 
the iron and steel produced in the Birmingham 
district from the ores of that region find sale in 
large amount in our northern and eastern States 
and are extensively exported to foreign countries, 
and it is very certain that those outlets would not 
be had if the quality was not satisfactory. In 
this connection it fits in very well to quote fur- 
ther from the testimony of Mr. Hopkins, who said 



50 Trusts versus The Public Welfare. 

to the commission, "I heard the president of the 
Richmond Locomotive works say that the steel 
they got from Birmingham was as good as any 
ever furnished them." Certainly no inferior 
quality of steel would be used in the production 
of as perfect a machine as a locomotive, and if 
steel made from Southern ore is as good as any 
ever furnished the Richmond Locomotive works 
it does not appear that the country is dependent 
upon Northwest trust owned and controlled ores 
for its steel production. 

The iron industry was started in Alabama in 
the latter part of the seventies to reach a produc- 
tion of 37,038 tons of pig-iron in 1878 which 
was increased to 1,300,000 tons in 1901, a greater 
pig-iron production in that one southern State 
than was produced in every State and territory in 
the Union in 1867. The Birmingham district is 
not producing pig-iron only, but many forms of 
iron and steel manufacture are turned out in 
large amount at the mills in that section. Steel 
is a recent product of the district, the output is 
rapidly enlarging and it is being widely used in 
the south in the manufacture of structural frames, 
stoves, railway rails, etc. A few years hence the 
Birmingham district will be one of the greatest 
iron and steel centers in the world. As iron and 



\ 



Trusts versus The Public Welfare. 51 

steel can be produced there at less cost than any- 
where else in America or in foreign countries, 
prices will be regulated from that center unless in 
the meantime the plants and properties are ab- 
sorbed by the United States Steel Corporation. 

There is not the slightest danger of our iron 
ore being exhausted in a hundred, or several hun- 
dred, years to come. It is in almost inexhaustible 
quantities in a number of our States, and when fur- 
ther supplies are wanted it will be developed and 
mined. The price of the Northwest iron ore is 
high and will be kept at an extreme figure be- 
cause of the ownership control and absorption of 
ore properties by the United States Steel Corpora- 
tion. The high price it puts on ore is one of the 
means it employs to cripple competition. 

TRUSTS A BAR TO INDUSTRIAL DEVELOPMENT AND 
PROGRESS. 

No sane man will ascribe the high state of 
prosperity that has prevailed in this country dur- 
ing the past four years to trusts, or combinations, 
they are only an incident of it. They have barred 
the way to the people availing themselves of all 
that prosperity promised ; they have imposed 
grievous burdens to stifle individual effort, to 



52 Trusts versus The Public Welfare. 

crush competitions to the end of monopoly of pro- 
duction and sale of manufactures, and have re- 
stricted the avenues of employment. Under their 
operations the development of the resources of 
the country is impeded and business contracted. 
Their so-called economies are conducted at the 
cost of the discharge of many thousands of 
capable men from employment, the lessening of 
opportunity for employment of other thousands 
of wage-earners by dismantling of plants and con- 
centration of manufacture, the loss of taxes to 
city, county and State, and in other ways to the 
injury of the public. 

At the end of the first year of the existence of 
the United States Steel Corporation its net earn- 
ings, after deducting $12,736,601 to meet 
bonded indebtedness and for depreciation of 
plants, etc., amounted to $111,503,053. After 
paying 7 per cent, dividend on its preferred stock 
and 4 per cent, dividend on its common stock that 
has no property backing and other charges, $25,- 
015,233 was placed to the account of the sinking 
fund. 

The statement of the United States Steel Cor- 
poration covering its second year's business shows 
net earnings amounting to $133,308,764. After 
providing for account of sinking fund on bonds of 



Trusts versus The Public Welfare. 53 

subsidiary companies, depreciation and extinguish- 
ment funds, extraordinary replacement funds, 
special funds for depreciation and improvements 
to the amount of $24,774,389, there was a balance 
of $108,543,374. Interest on United States 
Steel Corporation bonds $15,187,850, and sink- 
ing fund on the corporation's bonds $3,040,- 
000, a total of $18,227,850, reduced the balance to 
$90,306,524, out of which there was paid 7 per 
cent, dividend amounting to $35,720,177 on pre- 
ferred stock, and 4 per cent, dividend of $20,332,- 
960, on common stock, which left undivided profits, 
or a surplus, for the year of $34,253,557, which, 
with previous surplus of $25,015,233, made a total 
surplus of $59,268,790 in the treasury of the cor- 
poration out of the earnings of the business for 
two years. 

As the United States Steel Corporation is over- 
capitalized to the extent of at least $604,000,000, 
do you think the exacting of such profits as in- 
dicated by the net earnings fair and honest? 
They must be characterized extortion, as such 
gains on staple manufactures were impossible, 
and unknown, before the formation of combina- 
tions. I question that any individual company 
or firm conducting a business for the manufacture 
and sale of articles that are considered staple has 



54 Trusts versus The Public Welfare. 

in many years, if ever, obtained anything like so 
high profit on their wares, and I do not believe 
it possible they could have realized so great per- 
centage of profit as competition would have held 
prices in bounds to benefit consumers. 

COAL AND COKE FIELDS. 

Now let us consider the $100,000,000 of 
the capital stock of the United States Steel Cor- 
poration that is allotted to coal fields and coke 
properties. Mr. Schwab in his testimony before 
the commission said, " We own something like 
60,000 acres of Connellsville coal. There is no 
more Connellsville coal ; you could not buy it for 
$60,000 an acre. "The extravagances of Mr. 
Schwab's language will be apparent before I am 
done with this subject, and it will be discovered 
that his company does not have a monopoly of 
coking coal of high quality and that its holdings 
of such coal do not possess the value he places 
upon them. It is in his testimony that the cor- 
poration owns 54,269 acres of Connellsville 
coking coal and owns and leases 33,200 acres of 
steam coal. The principal value of this coal 
property is very properly assigned to the coking 
coal, the steam coal possessing very minor value. 



Trusts versus The Public Welfare. 55 

When the Carnegie Company purchased the H. C. 
FrickCoke Company's properties it secured 40,000 
acres of Connellsville coking coal, 11,652 coke 
ovens, 3,000 cars and other property. The 
capital stock of the H. C. Frick Company was $10,- 
000,000, for which unquestionably the Carnegie 
Company paid a large premium. To be absolute- 
ly on the safe side we will concede it was taken 
over at a premium of 50 per cent, or a cost of 
$15,000,000 ; then grant the United States Steel 
Corporation paid the Carnegie Company a pre- 
mium of 60 per cent, for the property, it, therefore, 
stands upon its books at a cost of $24,000,000, 
— the entire holdings of the H. C. Frick Company 
including the 40,000 acres of Connellsville 
coal. Such being the case is it reasonable to 
suppose that the remaining 14,269 acres of 
Connellsville coal lands belonging to the corpora- 
tion are equal in value to 40,000 acres of iden- 
tical land and other property originally possessed 
by the H. C. Frick Company ? The proposition is 
preposterous. The steam coal acreage owned 
and controlled by the corporation has small value 
compared with its coking coal properties, and I 
hazard the assertion that all coking and steam 
coal lands in the hands of the United States Steel 
Corporation are not worth, and would not sell 



56 Trusts versus The Public Welfare. 

for one half the sum assigned them in its capital 
stock. Only one construction can be put upon 
Mr. Schwab's statement that " we own something 
like 60,000 acres of Connellsville coal. There is 
no more Connellsville coal," and that is, that out- 
side of what is termed the Connellsville field no 
coal can be found that will produce a high grade 
coke for steel-making purposes. This view of 
the subject is set aside by Mr. Willis L. King, 
vice-president of Jones and Laughlin, Limited, a 
firm that has been engaged in the iron and steel 
manufacturing business for the past fifty years, 
who said in his testimony before the Industrial 
Commission that his firm own coal mines on the 
outskirts of the Connellsville field from which 
they get coal abundantly suited for their purposes 
that the coke made from it fills every requirement 
of their manufacture, which is as exacting as in 
the works of the United States Steel Corporation, 
and that they have a supply there that will last 
them thirty-five or forty years. Mr. King also said 
there are fields of coal in West Virginia and other 
places equally as good as Connellsville for coke- 
making purposes. 

These two gentlemen may be considered 
equally well posted upon all matters respecting 
what is required in iron and steel manufacture 



Trusts versus The Public Welfare. 57 

and whatever is used in it, but the question arises 
which is the most reliable at this juncture in 
statement of facts therewith. In the testimony 
presented one of them makes the most extrava- 
gant assertions as to a limited supply of coking 
coal in the United States and the value of what 
his company owns of it, evidently with a view of 
sustaining many ten millions of dollars of stock 
issued on fictitious values, while the other, a mem- 
ber of a partnership that has no watered stock on 
the market, or anywhere else, makes an unbiased 
statement that the whole supply of high grade cok- 
ing coal is not owned or controlled by the United 
States Steel Corporation, that there is plenty of 
such coal adjoining the Connellsville field and in 
West Virginia and other places equally as good 
as Connellsville for coking purposes which can be 
had at a fair and reasonable price. The only in- 
ference to be deduced from this is that the enor- 
mous value placed upon its coking coal by the 
United States Steel Corporation is without war- 
rant in fact. Mr. Schwab's peculiar views of the 
value of Connellsville coking coal and the justice 
of issuing $100,000,000, of stock based upon the 
coal land holdings of his company will hardly 
find favor with or be accepted by our people how- 
ever credulous they may be at times. 



58 Trusts versus The Public Welfare. 

THE COURSE OF PRICES FOR IRON AND STEEL SINCE 
THE FORMATION OF COMBINATIONS. 

While the United States Steel Corporation 
was not formed until February, 1901, combina- 
tions of iron and steel manufacturing concerns 
existing prior to that year were potent to ad- 
vance Bessemer pig-iron from an average price of 
$10.33 per ton in 1898 to $19.33 per ton in 
1899 and $19.49 per ton in 1900. The price 
declined in 1901, but in 1902 with the United 
States Steel Corporation, supreme dictator of prices 
for iron ore and iron and steel products, and pro- 
ducing at its furnaces about 60 per cent, of the 
Bessemer pig-iron of the country, the price was 
advanced to $24.25 per ton during the year. 
During this combination period, wages were ad- 
vanced 10 per cent. There were no other condi- 
tions than this advance of wages and extraordi- 
nary demands for pig-iron, steel billets and iron 
and steel products to warrant uncommon ad- 
vances of price and no justification for the extor- 
tionate prices that were established since 1898. 
The steel corporation simply had the power to 
compel consumers to pay whatever price it was 
pleased to fix for its products, and they were 
powerless to protect themselves against its fla- 
grant exactions, as supplies could not be obtained 



Trusts versus The Public Welfare. 59 

from other sources, the corporation keeping, ex- 
cept at short intervals, just within the limit of 
price that would admit importations from foreign 
countries. If it had not been possible to import 
pig-iron and iron and steel products in quantity 
to satisfy a large part of our requirements, prices 
would have been advanced to more extreme fig- 
ures. The trust was not actuated by kindly sen- 
timent in not adding 10 or 25 per cent, more to 
prices, the interests of the corporation alone 
caused them to halt within the limit of price that 
would open our ports to the foreign manufac- 
turer. 

The advantage taken of consumers by the 
combination was especially noticeable in the ad- 
vance in price of steel billets for which the highest 
price named in Pittsburgh in 1898 was $ 16.50 
per ton; under combination control of prices 
billets were advanced as high as $40.00 per ton 
in 1900, to decline to $33.00 per ton in 1902. 
Steel rails were advanced from $17.50 per ton, the 
lowest price in 1898, to $35.00 in 1900, small 
lots commanding higher prices. All iron and 
steel manufactures were enormously advanced in 
price during the period under consideration, and 
the manufacturers reaped great profit. 

The existing iron and steel manufacturers were 



60 Trusts versus The Public Welfare. 

active in 1902 in the construction of new blast 
furnaces of large capacity which will be in opera- 
tion in 1903 to supply all the pig-iron this coun- 
try will require. The working of these new fur- 
naces in conjunction with the old ones means lower 
prices for both pig-iron and steel billets, and con- 
sequently lower prices for iron and steel products. 
While prices at present are altogether too high for 
iron and steel and their products, they are much re- 
duced within the year, and with the new furnace 
addition to the output of pig-iron there will not be 
a recurrence of extreme prices. If the prices of 
iron and steel and their produgts were based on 
an honest capitalization of the companies pro- 
ducing them, they would be much less than now 
established, and most satisfactory dividends could 
be paid. 

In November, 1902, the Union Steel Company 
of Donora, Pa., with rod, wire, and nail mills in 
operation, and steel works and two blast furnaces 
of five hundred tons capacity in course of con- 
struction to be completed early in 1903, and the 
Sharon Steel Company with several open hearth 
furnaces and sheet, skelp and pipe mills, con- 
solidated with capital stock of $50,000,000. In 
December these properties were purchased by and 
merged into the United States Steel Corporation, 



Trusts versus The Public Welfare. 61 

thus removing from the market what promised to 
be a troublesome competitor and giving the great 
steel corporation the control of not less than 85 
per cent, of the wire and nail output of the country 
and materially swelling its output and control of 
other iron and steel products. We read in the 
public press that the United States Steel Corpora- 
tion has been negotiating with Jones and Laugh- 
lin of Pittsburgh, and the Sloss-Sheffield Iron and 
Steel Company of Birmingham, Ala., for their 
properties, but so far no sale has been made. 
There is no doubt of the desire of the United States 
Steel Corporation to possess the holdings of these 
concerns, and doubtless they will yet be purchased 
and merged into it. With the acquisition of the 
property of these two companies the corporation 
will produce and control the sale of near all the 
iron and steel output of the United States, and 
this is apt to occur unless there is some indication 
of the passage of a stringent anti-trust law in the 
near future. 

THE STANDARD OIL COMPANY. 

Reviewing the testimony before the Industrial 
Commission of the great and powerful corporation 
known as the Standard Oil Company, it reveals 
the successful attainment of ends through the in- 



62 Trusts versus The Public Welfare. 

strumentality of aggregated capital by unscrupu- 
lous scheming and practices that have no parallel 
in history. It discloses to view means and meas- 
ures employed to destroy competition and for 
the achievement of almost complete monopoly of 
the oil business of the United States such as only 
a master mind could devise. In fact I can go 
further and say a monopoly of the oil business as 
the production and sale of refined petroleum and 
its products by this company represents not less 
than 90 per cent, of the output of the United 
States. 

The idea of forming the Standard Oil Company 
with a view to monopolizing the oil business of 
this country originated in the giant mind of Mr. 
John D. Rockefeller, the most sagacious and far- 
seeing business man the world has ever produced, 
who in conjunction with Mr. Andrews was oper- 
ating an oil refinery in Cleveland, Ohio, in the 
latter part of the sixties. 

The success attending the drilling of Colonel 
Drake's well near Titusville, Pa., which began pro- 
ducing petroleum in August, 1859, caused intense 
excitement and the influx of a multitude of enter- 
prising men into what is known as the oil regions 
of Pennsylvania. Wells were drilled in great num- 
ber and over an extended territory to quickly de- 



Trusts versus The Public Welfare. 63 

velop the producing power of the region, and the 
output of oil amounting to 8,500 barrels in 1859 
was two years later increased to 2,118,000 barrels. 

TRANSPORTATION AND PIPE LINE CONSTRUCTION 
AND OPERATION. 

The most serious problem oil producers had to 
face was that of transporting their oil to the re- 
fineries and to markets. In the beginning of pro- 
duction, and for several years later, the nearest 
shipping point on a railroad was twenty-two miles 
from the wells. Other railroads were distant from 
twenty-eight to forty-four miles, and these stations 
had to be reached by wagon teams over bad roads 
at a cost as high as $3.00 and $4.00 per barrel for 
transportation, according as the roads were " sim- 
ply bad or very bad." Oil destined for Pittsburgh 
was loaded on barges on Oil Creek, floated down to 
the Alleghany River, and thence by boat to desti- 
nation. This system of transportation was so costly 
that it ate deeply into the very capital of the pro- 
ducers and ingenious minds sought to devise some 
means of relief. From this necessity the pipe-line 
system was evolved. In the meantime the railroad 
companies awoke to the fact that an immense 
carrying was to result from the development of the 
oil fields, and that their best interests would be 



64 Trusts versus The Public Welfare. 

subserved by extending their roads into the oil 
region and that work was entered upon. Before 
the end o£ 1862 one line of railroad was extended 
to Titusville and another to Franklin. " By means 
of the latter the Cleveland refining interest re- 
ceived its first great impulse." Oil City was 
reached in 1865, and within twelve months there- 
after the oil-producing territory was well supplied 
with railroads. 

While much was gained by producers in the ex- 
tension of railroads to the vicinity of their wells, 
there remained confronting them the high cost of 
delivering the barrel of oil by wagon to the rail- 
road. This situation was remedied by the introduc- 
tion of pipe-lines which gathered the oil from the 
wells and conveyed it to storage tanks at the rail- 
road station or to the cars. The first successful 
pipe-line was completed and in operation in De- 
cember, 1865, leading from Pithole to Oleopolis on 
the Alleghany River, a distance of seven miles. 
About the same time another pipe-line was com- 
pleted and operated from the wells to the railroad, 
some five miles distant. " The effect of these pipe- 
lines was to immediately reduce the cost of deliver- 
ing oil to shipping points from $2.00 and $3.00 per 
barrel by wagon, according to the condition of 
the roads, to an uniform price of $1.00 per barrel 



Trusts versus The Public Welfare. 65 

by pipe-line." Within twelve months six pipe- 
lines were in operation in the Pithole territory and 
the transportation problem well advanced to a 
satisfactory solution. Tank cars for carrying 
petroleum in bulk were placed upon the railroads 
in 1865, which facilitated and cheapened oil ship- 
ments, 

Mr, Patrick C. Boyle, editor of the Oil City 
Derrick, in his testimony before the Industrial 
Commission in 1899, said that prior to the laying 
of pipe-lines in 1865 the cost of sending a barrel 
of oil from the oil fields of Pennsylvania to New 
York by railroad was $7.45, and to Pittsburgh 
by boat $2.00. After the opening of the pipe-lines 
in December, 1865, the freight by railroad to New 
York was reduced to $5.55 per barrel, and if 
shipped via Pittsburgh, by boat and railroad, the 
rate was $4.59 per barrel. 

Authority for building pipe-lines prior to 1872 
was granted by special charter passed by the legis- 
lature. Other lines were laid in the oil region 
under authority of special charters before a pipe- 
line law was passed. In 1870 a free pipe-line 
law, giving the right of eminent domain in the 
State of Pennsylvania to companies formed for 
the purpose of constructing pipe-lines, was offered 
in the legislature to encounter the successful op- 



66 Trusts versus The Public Welfare. 

position of the Pennsylvania Railroad Company. 
This law was presented in each succeeding legis- 
lature to meet with defeat through the opposition 
of railroads and the Standard Oil Company until 
the session of 1883, when the clamor of the people, 
to which expression was given in numerous mass 
meetings, and urgent petitions to legislators de- 
manding the passage of the law, had effect and it 
passed by a small majority. 

While this free pipe-line law was being urged 
in the legislature of 1872 the people throughout 
the oil regions and neighboring counties were 
filled with righteous indignation, almost to a 
point to incite revolution and the destruction of 
the railroads, by the exposure of a corrupt bar- 
gain between the Pennsylvania, New York Cen- 
tral and Erie Railroads, signing for themselves 
and their subsidiary lines and connections, and 
the principal officers of the Standard Oil Company, 
who had purchased the charter of the South Im- 
provement Company for the purpose of conduct- 
ing the business of the Standard Oil Company 
under it, whereby enormous rebates of freight 
were to be allowed by the railroads named on all 
petroleum and its products shipped by the South 
Improvement Company, and drawbacks of like 
amount on all such shipments made by all other 



Trusts versus The Public Welfare. 67 

shippers were to be paid by the railroads to the 
South Improvement Company, as the fulfilment of 
such an infamous contract was bound to ultimate 
in the destruction of every refining interest not 
allied with the Standard Oil Company and place the 
oil producers at its mercy to their undoing and im- 
poverishment. 

The Pennsylvania Railroad was then, and for 
many years afterwards, all powerful to defeat any 
measure it was opposed to that was before the 
legislature of Pennsylvania for action ; it was 
bitterly hostile to pipe-lines being extended be- 
yond the territory to which they were then con- 
fined, but public indignation was at too high pitch 
to wholly disregard, and Colonel Scott, who was 
present at the session of 1872, told the leaders in 
the movement for a free pipe-line law that he 
would allow a law to pass with right of eminent 
domain if not to extend beyond the eight oil pro- 
ducing counties. As this was a large concession 
and such a law would immensely benefit the oil pro- 
ducers, and as it did not bar future effort to secure 
a pipe-line law with right of eminent domain to 
apply to the entire State, his proposition was ac- 
cepted and the law was promptly passed and went 
into effect. Under this act granting right of emi- 
nent domain to companies formed for the purpose 



68 Trusts versus The Public Welfare. 

of building pipe-lines work in the eight oil produc- 
ing counties was vigorously prosecuted and in com- 
paratively a short time twenty-six additional lines 
were laid. 

As the oil fields of Pennsylvania developed 
Mr. John D. Rockefeller foresaw the magnitude 
of the business that would result from the enor- 
mous production they promised, and the wealth 
and power to be gained by one great company 
acquiring the entire oil-refining interests of the 
country and the sale of the products of petroleum, 
and he determined that the company should be 
created and that he would be its ruling spirit. 
His plans were laid with consummate skill for the 
accomplishment of his purposes ; he had confi- 
dence in his ability to bring his every scheme to a 
successful conclusion ; he had faith that he could 
create and maintain the mighty oil monopoly now 
so firmly planted in America, and believed his 
ability to do this would be admitted by his asso- 
ciates, who would establish him as the head and 
chief director of any company formed upon lines 
he would suggest. He did not doubt his ability 
to maintain himself indefinitely as chief officer of 
the company, and was certain that great wealth 
would be his reward. The foundation of the 
great company he created, which stands to-day 



Trusts versus The Public Welfare. 69 

the most wonderful and successful business or- 
ganization in the world, was laid in 1867, when 
through his skilful management the firms of Wil- 
liam Rockefeller and Company, Rockefeller and 
Andrews, Rockefeller and Company, S. H. Hark- 
ness, and H. M. Flagler, oil refiners of Cleveland, 
Ohio, combined their plants and business under 
one general management, of which Mr. John D. 
Rockefeller was made president. 

Quoting from affidavit of Mr. Rockefeller be- 
fore the Industrial Commission as to the course 
pursued thereafter in the enlargement of the 
business of which he was the head, he said : " As 
time elapsed and the possibilities of the business 
became apparent, we found further capital to be 
necessary, obtained the required persons and capital 
and organized the Standard Oil Company." 

THE STANDARD OIL COMPANY OF OHIO. 

The Standard Oil Company of Ohio was organ- 
ized January 10, 1870, with capital stock of 
$1,000,000. Mr. H. M. Flagler in his testimony 
before the Congressional Committee on Manu- 
factures in 1888 said the firm of Rockefeller, An- 
drews and Flagler (the combined firms before 
mentioned) practically formed the Standard Oil 



70 Trusts versus The Public Welfare. 

, Company of Ohio and turned its works with a 
capacity o£ 600 barrels of crude oil per day over 
to that company, receiving its stock in payment. 
The acquisition of refining plants and interests 
was promptly begun and energetically pushed by 
the president and officers of the new company to 
enlarge its business and power, and continued 
until available means were exhausted. On Feb- 
ruary 12, 1872, the capital of the company was 
increased to $2,500,000. It is in evidence that 
Colonel Thomas Scott of the Pennsylvania Rail- 
road, Mr. William H. Vanderbilt of the New 
York Central Railroad, Mr. Jewett of the Erie 
Railway, and Mr. Waters of the Lake Shore and 
Michigan Southern Railroad became stockholders 
in the Standard Oil Company at this time. 

THE SOUTH IMPROVEMENT COMPANY. 

A short time before the increase of the capital 
stock of the Standard Oil Company its officers, 
acting for the company, purchased a charter issued 
by the State of Pennsylvania in May 1871 to S. 
S. Moon and others to form a corporation to be 
known as the South Improvement Company, one 
of the most remarkable charters ever granted by 
a State ; perpetual as to time, no limit to capi- 
tal stock, license to engage in any and every busi- 



Trusts versus The Public Welfare. 71 

ness save only banking and the issue of money, 
authority to do business at will in any State, ter- 
ritory or foreign country, the fullest authority for 
the officers and directors to conduct the affairs of 
the company in such manner as pleased them 
without question from the public, and not a soul 
responsible for anything. A liberal charter in- 
deed that unscrupulous men could use with telling 
effect in every plan and purpose of oppression 
and spoliation they might determine to employ 
for their advancement to wealth and power. 

The leading men of the Standard Oil Company 
did attempt to use the charter of the South Im- 
provement Company to destroy opposition to their 
quick monopoly of the oil business of the United 
States by entering into a conspiracy with certain 
railroad companies for the transportation of 
petroleum and its products upon terms that would 
utterly destroy the business of their competitors, 
and establish them the sole refiners of petroleum 
in this country to not alone fix extortionate prices 
for refined oil, but to dictate the price for crude 
oil to the impoverishment of producers. 

On January 2 1872 Messrs John D. Rockefel- 
ler, William Rockefeller, H. M. Flagler, J. A. 
Bostwick, W. G. Warden, 0. H. Payne, P. H. 
Watson, 0. H. Waring, Richard S. Waring, 



72 Trusts versus The Public Welfare. 

Charles Lockhart, William Frew, John P. Logan 
and W. P. Logan organized as a body corporate 
under their purchased charter of the South 
Improvement Company for the purpose, beyond 
question, of merging into it the various interests 
of the Standard Oil Company. This conclusion 
is warranted by the statement of W. G. Warden, 
secretary of the newly organized company, in his 
testimony, in which he said that " the purpose of 
the South Improvement Company was to refine 
oil and get all the refineries of the country into 
the company." As the organizers and principal 
men at the head of the South Improvement Com- 
pany were officers, directors and large stockhold- 
ers of the Standard Oil Company, and as that 
company had absorbed a number of the principal, 
the largest, refineries of the country, it is not, for 
a moment, to be presumed that it would be left 
out the combination then planned. 

The Standard Oil Company magnates practised 
methods peculiar to themselves to reach the power 
of monopoly such as the ordinary business man 
possessed of conscience would not feel comfortable 
in using. It is a matter of history and of evi- 
dence before the Industrial Commission that a 
large number of refiners were forced to sell their 
plants and business to the Standard Oil Company 



Trusts versus The Public Welfare. 73 

after being informed of its special freight 
agreement with the railroads, by threats of the 
destruction of their business if they attempted 
to operate their refineries independently. The 
truthfulness of this averment is verified by Mr. 
Frank Rockefeller, brother of Mr. John D. Rocke- 
feller, in his testimony before a congressional 
committee on July 7, 1876, when he said that 
Henry M. Flagler and John D. Rockefeller said 
to him, " If you don't sell your property to us it 
will be valueless because we have got advantages 
with the railroads." Continuing his testimony he 
also said, " We had in Cleveland at one time about 
30 refineries, but the South Improvement Com- 
pany was formed and the Cleveland Companies 
were told that if they did not sell their property to 
them it would be valueless, that there was a com- 
bination of railroad and oil men, that they would 
buy all they could and that all they did not buy 
would be totally valueless because they would be 
unable to compete with the South Improvement 
Company, and the result was that of the 30 there 
were only four or five that did not sell." 

Another witness testified before the Industrial 
Commission that the Standard Oil Company, 
through Mr. John D. Rockefeller, induced 20 of 
the 25 independent refiners of Cleveland by 



74 Trusts versus The Public Welfare. 

threats to destroy their business, to sell their works 
to the Standard at values placed upon them by 
appraisers of his selection. 

The infamous rebate and drawback contract 
between the railroads and the South Improve- 
ment Company, which threatened the absolute 
destruction of the independent refining industry 
in the United States, and the placing of every 
oil producer in subjection to the South Improve- 
ment Company, was signed January 18, 1872, by 
J. Edgar Thompson, president, for the Pennsyl- 
vania Railroad Company and all railroads it owned 
and controlled, by William H. Vanderbilt, vice- 
president, for the New York Central and Hudson 
River Railroad and the Lake Shore and Michigan 
Southern Railroad Company, by Jay Gould, pres- 
ident, for the Erie Railway Company and for the 
Atlantic and Great Western Railroad Company, 
and by Peter Watson for the South Improve- 
ment Company. The contract was to remain 
in force for a period of not less than five years 
from date, " and not to terminate then or there- 
after until one of the parties shall have given 
twelve months' written notice to terminate it." 

The contract with the Pennsylvania Railroad 
Company on its own behalf and on behalf of the 
railroads owned and controlled by it is in sub- 



Trusts versus The Public Welfare. 75 

stance that " the Pennsylvania Railroad Company 
will pay to the South Improvement Company 
on all petroleum and its products transported 
over its railroads and connections for it, rebates, 
and on all transported for others, drawbacks, 
except from points on the Oil Creek and Allegheny 
River Railroad to Oil City, Union, Cory and 
Irvineton, which are designated common points," 
the gross rates to be on each barrel of 45 gallons 
in bulk, and on each barrel of 4.7 gallons in 
barrels. 

On Crude Petroleum. 

From any common point, named above, (for each barrel of 
45 gaUons) to — 

80 cents 



Cleveland . . . 


80 


Pittsburgh. . . 


80 


New York . . . 


. $2.56 


Philadelphia. . 


. 2.41 


Baltimore . . . 


. 2.41 


Boston .... 


. 2.71 



On Refined Oil, Benzine and Other Products op the 
Manufacture of Petroleum. 

From Pittsburgh (for each barrel) to — 

New York .... $ 2.00 

Philadelphia . . 1.85 

Baltimore .... 1.85 
From Cleveland (for each barrel) to — 

Boston $ 2.15 

New York .... 2.00 



76 Trusts versus The Public Welfare. 

Philadelphia. . . $1.85 
Baltimore .... 1.85 
From any common point, named above, all in the oil region, 
(for each barrel) to — 

New York .... $ 2.92 
Philadelphia. . . 2.77 
Baltimore .... 2.77 
Boston 3.07 



Petroleum refineries were first established in 
Pennsylvania. As early as 1865 there were 90 
of them in operation in the oil regions, and Oil 
City, Union, Cory, and Irvineton, which were 
designated common points in the South Improve- 
ment Company contract with the railroads, were 
the shipping points for their product. A com- 
parison of the freight rates on refined oil, benzine 
and other products of the manufacture of petro- 
leum shows discrimination in favor of the South 
Improvement Company against the independent 
refiners at common points of 92 cents per barrel 
from Pittsburgh and Cleveland to the seaboard, 
an amount the refiners in the oil regions would 
have regarded a splendid profit on a barrel of oil. 

Besides these outrageous discriminations in 
freight rates against the oil region, the benefit of 
which was to accrue to the South Improvement 
Company in particular, there comes the rebates and 
drawbacks granted exclusively to that company 



Trusts versus The Public Welfare. 77 

by means of which absolute monopoly of the re- 
fining and sale of petroleum and its products was 
assured it. The railroad company under its con- 
tract agreed to pay and allow the South Improve- 
ment Company on all petroleum and its products 
that it shipped over the Pennsylvania Railroad 
and roads under its control the following rebates, 
and drawbacks of the same amount, on all petro- 
leum and its products transported for others. 

Rebate per barrel on the transportation of 
crude petroleum from the gross rate from any 
common points, in the oil region, to — 



Cleveland . . . 


40 cents 


Pittsburgh . . 


40 " 


New York . . 


. $ 1.06 


Philadelphia. . 


• 1.06 


Baltimore . . . 


. 1.06 


Boston 


. 1.06 



which alone would have insured a large profit 
to the South Improvement Company over any 
possible returns to its competitors. 

The production of crude petroleum in 1872 
was 6,539,100 barrels. 

Rebate per barrel on transportation of refined 
oil, benzine and other products of the manufac- 
ture of petroleum from the gross rate from 

Pittsburgh to New York 50 cents. 

Philadelphia 50 " 

Baltimore 50 " 



78 Trusts versus The Public Welfare. 

Cleveland to Boston. 50 cents 

New York 50 " 

Philadelphia ....50 " 

Baltimore 50 " 

Common points in the 

oil regions to New York $1.32 

Philadelphia 1.32 

Baltimore 1.32 

Boston 1.32 

Do not overlook the fact that, besides the re- 
bates mentioned, the South Improvement Com- 
pany was to be paid a like amount as a drawback 
on all petroleum and its products shipped by 
competitors. To illustrate this, the South Im- 
provement Company was to receive a rebate of 50 
cents on every barrel of refined oil, benzine and 
other products of the manufacture of petroleum 
it shipped from Pittsburgh and Cleveland to the 
eastern seaboard, and 50 cents per barrel as a 
drawback on all such shipments made by others 
from same points to the same destination, or a 
total of $1.00 for every barrel of refined oil and 
the products of petroleum transported from 
Pittsburgh and Cleveland to Boston, New York, 
Philadelphia and Baltimore. 

While the South Improvement Company 
(which meant the Standard Oil Company) was 
not refining in the oil regions, the $1.32 per 
barrel allowed on shipments from the common 



Trusts versus The Public Welfare. 79 

points (all located in the oil region) represented 
the drawback to be paid to it on every barrel of 
refined oil, benzine and other products o£ the 
manufacture of petroleum shipped by the refiners 
of that region to the seaboard. Provisions for 
payment of rebates and drawbacks were also 
made upon a liberal scale on shipments from 
points other than those mentioned to the sea- 
board, and to points west, northwest and south 
of Pittsburgh and Cleveland. Nothing was left 
undone in the line of freight discrimination that 
would advantage the South Improvement Com- 
pany and hurt independent refiners and pro- 
ducers. 

In the face of a proposition of this nature do 
you think it possible for a competitor to live ? 
Is it not your deliberate judgment that the carry- 
ing out of the terms of such a contract meant 
the early and permanent subsidence of all com- 
petition and the founding of a grinding mono- 
poly? 

The history of this iniquitous compact does not 
end here, more was granted the South Improve- 
ment Company than the payment of big rebates 
on all petroleum and its products it was expected 
to ship, and the payment of drawbacks of like 
amount to it by the railroads on every barrel of 



80 Trusts versus The Public Welfare. 

petroleum and the products of its manufacture 
that they expected to carry for producers and 
independent refiners. The contract stipulated 
that the railroad company was to keep a record 
of all petroleum and its products transported by 
it, showing the number of barrels in bulk and 
in barrels, points of shipment and destination, 
amount of freight paid, and name of consignor 
and consignee, " which record shall at all reason- 
able times be open to the inspection of an accred- 
ited representative of the South Improvement 
Company,'' and monthly abstracts of all such 
records were to be sent regularly to the com- 
pany. 

The contract also required the railroad com- 
pany to send daily to the South Improvement 
Company duplicate manifests, or way bills, of all 
petroleum and its products carried by it and its 
subsidiary roads, with name of consignor and 
consignee, place from whence shipment was made 
and destination of same, kind and actual quan- 
tity of articles shipped, and rate of and amount 
of freight paid. And it was further covenanted 
that the railroad company would charge all other 
shippers "no less than the gross rates above 
specified, and should any less rate be charged at 
any time for the transportation of petroleum and 



Trusts versus The Public Welfare. 81 

its products, directly or indirectly, either hy re- 
bate, commission, allowance or any pretext what- 
soever, the same reduction per barrel shall be 
made the South Improvement Company from the 
net rate provided for it on all articles transported 
for that company during the period in which the 
reduction was made to others." Finally, to make 
sure of the attainment of all that was desired by 
the South Improvement Company it was agreed 
that the railroad company " would at all times 
co-operate with it to maintain its business against 
loss or injury by competition to the end that 
the South Improvement Company keep up a re- 
munerative, full and regular business with the 
railroad, and for that purpose the railroad would 
lower or raise the gross rates for transportation 
as far as the laws of the country would permit, 
for such time and to such extent as may he nee- 
essary to overcome such competition, the rebates 
and drawbacks to the South Improvement Com- 
pany to be varied pari passu with the gross rate." 
The New York Central and Hudson River 
Railroad, Lake Shore and Michigan Southern 
Railroad, Erie Railway, and Atlantic and Great 
Western Railroad contracts with the South Im- 
provement Company were identical in terms with 
the contract with the Pennsylvania Railroad 



82 Trusts versus The Public Welfare. 

Company in the matter of rebates and drawbacks, 
reporting shipments of competitors and all partic- 
ulars of their shipments, co-operation with the 
company to maintain its business against injury 
or loss by competition, and their powerful aid to 
destroy the business of its competitors. In con- 
sideration of these most remarkable concessions 
and agreements upon the part of the railroads the 
South Improvement Company allotted 45 per 
cent, of its shipments to the seaboard and inter- 
mediate points to the Pennsylvania Railroad, 27£ 
per cent, to the New York Central Railroad and 
its connections, and 27^ per cent, to the Erie 
Railway and its connections. 

Mr. M. L. Lockwood, independent oil producer, 
of Butler county, Pennsylvania, in his testimony 
before the Industrial Commission in 1899 said : 
" When the provisions of the contract between 
the railroads and the South Improvement Com- 
pany became known it created such a furore in 
the oil regions as has seldom been seen, men saw 
the principles of equal rights destroyed, the 
highways over which their products must go to 
market being in the hands of a set of brigands 
who had pledged themselves to rob the people of 
an average of more than $1.00 a barrel on all the 
oil they produced and give it to the 13 men who 



Trusts versus The Public Welfare. 83 

constituted the South Improvement Company. 
Men came together and consulted, meetings were 
called, and the more that was learned of the pro- 
visions of the South Improvement Company 
contract the more awful the crime which was 
attempted against the rights of the people 
developed to be. Mass meetings at Franklin, Oil 
City, Titusville and Parkers were attended by 
thousands. Men determined that if the railroads 
were to be used to destroy the great American 
right of equality they would have no railways, 
they would tear up their tracks and burn their 
bridges." Demands were made of the legislature 
in the best interests of the people that the South 
Improvement Company charter be repealed. The 
demand was heeded, and on March 25th, two 
months and 22 days after the organization of the 
company, the charter was revoked. 



REBATES. 



7 

After the repeal of the South Improvement 
Company Charter, the Standard Oil Company of 
Ohio continued its policy of merging refineries 
to restrict competition and increase its powers. 
Whilst it was an almost universal practise of the 
railroad companies to grant rebates to shippers, 
the Standard was favored above all others j the 



84 Trusts versus The Public Welfare. 

rebates paid to it were so much in excess of re- 
bates to others that it enabled it to market its 
products, if it conceived it to its interests to do 
so, at a price representing a fair profit, when the 
same price made by a competitor on his product 
meant a loss to him. The practise of conceding 
rebates to shippers continued down to the passage 
of the law creating the Interstate Commerce 
Commission in 1887. 

An example of the rebates paid the Standard 
Oil Company in that period mentioned in the 
report of the Industrial Commission is from the 
testimony of Mr. A. J. Cassatt, then vice-pres- 
ident of the Pennsylvania Railroad, in which he 
said that at the time of certain shipments by the 
Standard Oil Company the rate on oil was $1.90 
per barrel, but the rate to the Standard was 80 
cents, a difference of $1.10 which was paid to 
that company as a rebate. Mr. J. D. Archbold, 
vice-president of the Standard Oil Company, in 
his testimony acknowledged payment of rebates 
of 64| cents per barrel by the Pennsylvania 
Railroad Company to the Standard. 

Interesting correspondence upon this subject 
is noted in the report of the Commission between 
Mr. Daniel O'Day, general manager of the 
Standard Oil Company, and Mr. Cassatt, of the 



Trusts versus The Public Welfare. 85 

Pennsylvania Railroad. Mr. O'Day wrote Mr. 
Cassatt that " We have for many months received 
from the New York Central and Erie Railroads 
certain sums of money, in no instance less than 
20 cents per barrel on every barrel of crude oil 
carried by each of these roads. I am constrained 
to say to you in justice to the interests I repre- 
sent we should receive from your company at 
least 20 cents per barrel on each barrel of crude 
oil you transport. In submitting this proposi- 
tion I feel that I should ask you to let this date 
from the first of November, 1877, but I am will- 
ing to accept as a compromise the payment by 
you of 20 cents a barrel on all the crude oil 
shipped commencing February 1, 1878. I make 
this proposition with the full expectation that it 
will be acceptable to your company, but with the 
understanding on my part that in doing so I am 
not asking as much of the Pennsylvania road 
and its connections as I have been and am receiv- 
ing from the other trunk lines." 

In this letter of Mr. O'Day he requests, rather, 
plainly demands, payment of 20 cents per barrel 
on all crude oil transported by the Pennsylvania 
Railroad and its various subsidiary roads, not 
only for the Standard Oil Company but for the 
crude oil transported for all others since No- 



86 Trusts versus The Public Welfare. 

vember 1, 1877 ; but rather than there should be 
contention between them he would compromise 
on the payment of 20 cents per barrel on all 
crude oil carried by the roads since the first day 
of February, 1878. Respecting the subject 
matter of this letter, Mr. Cassatt said in letter 
to Mr. R. W. Downing, comptroller of the Penn- 
sylvania Railroad : " I agreed to allow this com- 
mission from and after February 1st until further 
notice after having seen receipted bills showing 
that the New York Central Railroad allowed 
them a commission of 35 cents a barrel, and that 
the Erie Railway allowed them a commission 
of 20 cents a barrel on Bradford oil, and 30 
cents a barrel on all other oil, and that they had 
been doing so continuously since the 17th day of 
October last. Of this, however, you saw the evi- 
dence yourself in the bills which I submitted to 
you last week. Please, therefore, prepare vouch- 
ers in favor of the American Transfer Company, 
per Daniel O'Day, for this commission of 20 
cents per barrel on shipments during February, 
March and April, and hereafter make settlement 
monthly." 

The payment directed by Mr. Cassatt, as above, 
of 20 cents per barrel on crude oil shipments for 
the months of February and March amounted to 



Trusts versus The Public Welfare. 87 

$68,753.50. The American Transfer Company, 
to whom payment was made, is a constituent of 
the Standard Oil Company, its transportation 
company. 

Thus is shown the dominion of the Standard 
Oil Company over the three most powerful rail- 
roads of the country in 1878, and in after years 
its demands were promptly acceded to without 
protest. 

The vast sum received yearly by the Standard 
Oil Company in rebates on crude oil shipped 
from the oil regions of Pennsylvania can be 
better estimated when it is understood that the 
average annual production from 1878 to 1886 
inclusive was 22,888,708 barrels, and that three- 
fourths or more of it was carried from the oil 
fields to distant refineries and to markets by rail- 
roads paying rebates. This in conjunction with 
rebates paid by the roads on refined oil poured a 
vast treasure into the vaults of the company to 
facilitate the work of destroying competition and 
perfecting monopoly. The intensity of indigna- 
tion so universally felt among the oil refiners and 
producers in the oil regions at that time, and 
that has not yet abated, is manifest in the utter- 
ance of Mr. Lockwood who said to the Commis- 
sion : " The facts which I shall present I desire 



88 Trusts versus The Public Welfare. 

to be construed against an accursed system of 
railway discriminations which have made this 
great curse, the Standard Oil Trust monopoly, a 
possibility. Against a system that has enabled 
the Standard Oil Company people to drive into 
obscurity, bankruptcy or servitude, the men whose 
energy and enterprise developed the great oil 
producing and refining business of America, for 
before the blighting curse of railway discrimina- 
tions was turned against the oil refining men 
they prospered and grew rich in the refining 
business. They doubled the capacity of their 
refineries, adopted new and better processes, and 
were going forward in a business that promised 
much for themselves and their descendants. No 
business ability however great, no better process 
however superior, could triumph when the high- 
ways over which you must go to market were 
closed against you and manipulated in the inter- 
est of your competitors. The competitive con- 
test in the business forced hundreds of the best 
minds to the study of better and more economic 
processes in refining, and the most rapid strides 
were made in perfecting and cheapening cost. 
Many refinery men made many buyers of crude 
oil, and the producer selling his oil in the com- 



Trusts versus The Public Welfare. 89 

petitive market was enabled to obtain a fair share 
of the profit in the business." 

Mr. Rockefeller and his associates^ not being 
satisfied with the power they then possessed, re- 
solved to perfect an organization through whose 
instrumentality every obstacle barring their way 
to complete monopoly of the oil business could 
be overcome, and to that end transformed the 
Standard Oil Company into the 

STANDARD OIL TRUST. 

The Standard Oil Trust was organized January 
2, 1882, and conducted its business under the 
trust form until 1892 with great satisfaction, as 
the management was able " to keep people who 
had no business to know from knowing the 
secrets of the trust " and interfering with their 
well-laid plans to bring about the destruction of 
their competitors. 

In 1892 the court declared the Standard Oil 
Trust an illegal combination in restraint of trade 
and it was dissolved to resume corporate existence 
under its State charter. 

The nine directors the trust agreement pro- 
vided for were duly elected. Messrs. John D. 
Rockefeller, 0. H. Payne, William Rockefeller, 
J. A. Bostwick, H. M. Flagler, W. G. Warden, 



90 Trusts versus The Public Welfare. 

Charles Pratt, Benjamin Brewster and John D. 
Archbold were elected as the board of trustees. 
" Thirty-nine companies and firms joined in the 
trust agreement, 14 of them assigned all their 
stock to the trustees, except a few shares they had 
to retain in order to preserve their state organi- 
zation, and 25 assigned a controlling interest." 
The trustees individually owned a majority of the 
stock of the various companies, and were in fact 
managing their own property. The aggregate 
capital stock of the companies and partnerships 
in the trust amounted to $47,830,200. 

PIPE-LINE HISTORY. 

The opposition of the Standard Oil Company 
in the early seventies to the passage of a free 
pipe-line law giving the right of eminent domain 
to companies formed for the purpose of building 
pipe-lines was due to the favorable contracts it 
had with the railroads for transporting crude oil 
and the output of its refineries, through the 
operation of which the company believed it 
could, in a reasonably short time, destroy com- 
petition and monopolize the oil business of the 
country. Upon the failure of the South Im- 
provement Company scheme a large measure of 
advantage was lost, and as it was apparent that 



Trusts versus The Public Welfare. 91 

minimum cost of transporting oil could only be 
attained by means of pipe-lines the Standard 
began to purchase them and ceased opposing the 
passage of a pipe-line law. This change of 
heart occurred about 1877, and likely it was then 
that Mr. Rockefeller realized what he declared in 
his affidavit of December 30, 1899, to the Indus- 
trial Commission, that " the entire oil business is 
dependent upon this pipe-line system, without it 
every well would shut down and every foreign 
market would be closed to us." 

By 1874 the oil fields contained an extensive 
mileage of pipe-lines, the larger part of which 
-was merged into the United Pipe Line Company 
formed that year. By 1877 nearly all the pipe- 
lines in the oil territory had been absorbed by 
the United Pipe Line Company, which was then 
purchased by the National Transit Company, a 
subsidiary company of the Standard Oil Com- 
pany. The possession of this pipe-line system 
was of very great consequence to the Standard 
Oil Company to lessen cost of transportation of 
oil to its tank cars and storage tanks, for the 
power the ownership of the lines gave to hamper 
the operations of independent refiners in obtain- 
ing supplies of crude oil at as low cost as their 
great competitor, and the facilities their posses- 



92 Trusts versus The Public Welfare. 

sion afforded to force producers to sell their 
crude oil to the Standard Oil Company at reduced 
prices. The purchase of the United Pipe Lines 
was made comparatively easy by reason of supplies 
of oil being diverted from them and their business 
made unprofitable by efforts put forth by the 
Standard to accomplish that end, and because of 
the railroads having turned over their terminals 
on the seaboard to that company, thus excluding 
all others from storage of their oil at terminal 
points on our eastern coast and practically consti- 
tuting the Standard Oil Company the only shipper 
of oils to those points. Thereafter, almost as 
soon as a new pipe-line was laid it was purchased 
by the Standard in the name of the National 
Transit Company. The independent pipe-line 
companies were hindered in many ways by the 
railroads in the interest of the Standard Oil Com- 
pany, that was constantly profited and strength- 
ened by their acts. 

In 1883 the Standard Oil Company controlled 
90 per cent of the capacity of pipe-lines leading 
from the oil fields. 

The first attempt to transport oil to the sea- 
board by pipe-line was made by independent oil 
men who constructed a line from the oil regions 
to Buffalo, New York ; shipment thence by boat 



Trusts versus The Public Welfare. 93 

and barge through the Erie canal to New York 
harbor. The canal being closed during the win- 
ter months, this did not prove to be a desirable 
or profitable route, so another line was projected, 
which was entitled the Tidewater Pipe Line Com- 
pany Limited, that secured right of way and laid 
a six-inch pipe from the Bradford oil fields to 
Williamsport (110 miles), the terminus of the 
Catawissa branch of the Philadelphia and Reading 
Railroad, from which point shipment was made to 
Philadelphia and New York under contract with 
the Philadelphia and Reading and the Central 
of New Jersey railroads. In this way the inde- 
pendent oil men could land their oil at the sea- 
board at the rates paid by the Standard Oil Com- 
pany to the trunk lines of railways. This pipe- 
line was completed and oil pumped through it and 
carried to the seaboard in June, 1879. 

Upon the opening of the Tidewater Pipe 
Line for business the Standard Oil Company rep- 
resentatives met the agents of the four trunk 
lines of railroads in conference, on June 5th, 
when an agreement was reached, under which the 
railroads established for the Standard a rate of 20 
cents a barrel (reduced from the regular rate of 
$1.40 per barrel) on crude oil to New York, 
Philadelphia and Baltimore to go into effect June 



94 Trusts versus The Public Welfare. 

1st, a price that was then charged to pipe a barrel 
of oil from the wells to a shipping point on the 
railroad only a few miles distant from them. 
Four years later, in 1883, the Tidewater Pipe 
Line was absorbed by the Standard Oil Com- 
pany, and the competition it fostered was largely 
done away with. 

Whilst the first pipe-line from the oil regions 
towards the seaboard was laid in 1879, the first 
through pipe-line to the coast was built in 1883 
by the Standard Oil Company. The idea of 
transporting oil through pipe-lines in the oil 
fields to storage tanks, to the railroads, and to 
New York, Philadelphia and Baltimore, was not 
original with the Standard Oil Company, the 
independent oil men originated that system of 
transportation at the oil fields, and projected the 
first line reaching out to the seaboard, but not 
completed to it on account of the opposition of 
the railroads — instigated by the Standard Oil 
Company. 

The independent oil producers and refiners 
organized the United States Pipe Line Company 
in 1890, and began the construction of its pipe- 
line from the oil fields via Hancock on the Dela- 
ware River and through New York State to the 
Hudson River. When the line had been laid to 



Trusts versus The Public Welfare. 95 

near Hancock the Erie Railway would not permit 
the placing of the pipes under its tracks and over 
its right o£ way, thus successfully blocking fur- 
ther advance. As no legal steps could be taken 
by which to obtain authority to cross over the 
right of way of the Erie Railway that route had 
to be abandoned. 

The legislature of the State of New York 
passed in 1878 the first pipe-line law that was 
enacted in the United States, giving the right of 
eminent domain to companies formed for the 
purpose of building pipe-lines. This law was 
in effect when the United States Pipe Line Com- 
pany began laying its pipes and until just before 
they reached the vicinity of Hancock, when the 
legislature repealed that part of it giving the 
right of eminent domain ; without that right the 
Pipe Line Company was powerless to go on with 
its work in the State of New York, and that 
route had to be given up. The independent oil 
men believe the repeal of that feature of the law 
was at the behest of the Standard Oil Company, 
and as its interests would have been affected 
more than the interests of the State, or a multi- 
tude of other people, it is a very natural infer- 
ence. The fact that the Standard Oil Company 
dominated the Erie Railway and other trunk 



96 Trusts versus The Public Welfare. 

lines of railroads must not be overlooked, when 
we consider the opposition of that company to 
the pipes being carried across its right of way. 

Being barred from crossing the State of New 
York with its pipes the United States Pipe Line 
Company made a new start to the seaboard from 
Athens, Pennsylvania, about four miles from the 
New York State line, thence to Wilkesbarre and on 
through New Jersey to New York bay. When 
the track of the Belvidere Railroad, owned by 
the Pennsylvania Railroad Company, was reached 
a halt was called by an injunction, although the 
Pipe Line Company owned an acre of land at the 
proposed crossing. Upon trial of the case a 
decision was rendered in favor of the United 
States Pipe Line Company, and after a year's 
delay the crossing was effected and the laying 
of pipes advanced further into the State. When 
the tracks of the Delaware, Lackawanna and 
Western Railroad were reached, at Washing- 
ton, New Jersey, which were laid over land 
owned by the Pipe Line Company, the pipes were 
laid under them at night to avoid the stopping 
of work by injunction. The next morning a 
strong force of men appeared under orders from 
the Railroad Company to remove the pipes, but 
they were repulsed. A day or two later some 



Trusts versus The Public Welfare. 97 

250 men appeared and attacked those guard- 
ing the pipes, and they also were compelled to 
retire. It was then agreed to take the matter 
into court, which was done, and after seven 
months' delay a decision was rendered in favor of 
the Pipe Line Company. During that seven 
months the United States Pipe Line Company 
maintained a strong guard, armed with Springfield 
rifles, at the crossing to prevent the removal of 
its pipes. After the decision of the court was 
handed down work was resumed and the line 
completed to Hampton Junction, 51 miles from 
New York harbor. The line could not be com- 
pleted to New York because of the opposition 
of railroads to the pipes crossing their right of 
way. This was a double pipe-line starting from 
Bradford, Pennsylvania, one pipe for crude oil, 
the other for refined. 

Mr. Lewis Emery, Jr., in his testimony before the 
Industrial Commission, referring to the United 
States Pipe Line Company's contention with the 
Delaware, Lackawanna and Western Railroad 
about the crossing at Washington, New Jersey, 
said : " We bound our pipes in with wire and we 
tied them down ; we barricaded our house and staid 
there for seven months holding possession until 
the court decided we had a right to stay there. 



98 Trusts versus The Public Welfare. 

The very men who are at the head of this — I 
know them — the men who were there on watch, 
were in the employ of the Standard Oil Com- 
pany." 

The oil received at Hampton Junction through 
the pipes is transported to New York harbor by 
the Central of New Jersey Railroad under con- 
tract with the United States Pipe Line Company 
to perform that service. 

It is in evidence that the Standard Oil Com- 
pany obstructed the building of this pipe-line 
by taking options at extreme prices on the right 
of way it was expected to cross. " Its agents 
would offer to take an option on the right of 
way over a farm at more money than the entire 
farm was worth ; " and overbid the Pipe Line 
Company whenever opportunity offered. 

After four years, the case having been ap- 
pealed, the higher court handed down its de- 
cision, overruling the judgment of the lower court, 
denying the right claimed by the United States 
Pipe Line Company to lay its pipes under the 
track of the Delaware, Lackawanna and Western 
Railroad, and ordered the removal of the pipes it 
had so laid. A decision that has been much 
criticised and severely condemned. 

The Standard Oil Company had insisted that 



Trusts versus The Public Welfare. 99 

refined oil could not be transported to a distant 
point through pipes without impairing its quality. 
This illusion was dispelled when it became known 
that many hundred thousands of barrels o£ re- 
fined oil had been pumped through the pipe to 
Hampton Junction, and not a barrel of it con- 
demned. This according to the testimony of 
Mr. James W. Lee before the Industrial Commis- 
sion in 1899. 

Another example of the methods of the Stan- 
dard Oil Company in dealing with a rival, or com- 
petitor, in any branch of its business, and the 
despotic power it exercised over great railroad 
companies to compel compliance with its demands, 
is seen in its contest in 1877 with the Pennsyl- 
vania Railroad Company to compel it to crush the 
Empire Transportation Company, then operating 
near a thousand tank cars and 400 rack cars over 
its road, and about 500 miles of pipe-line in the 
oil regions. 

The Empire Transportation Company having 
secured a pecuniary interest in a large refinery 
in New York and in one in Philadelphia, it was 
made a pretext by the Standard Oil Company to 
charge the railroad company with discriminating 
in rates in favor of the Empire Transportation 
Company, and for it to demand a material in- 



ioo Trusts versus The Public Welfare. 

crease of rebates on all of its products carried 
by the railroad. The demand for larger rebates 
being refused, the Standard then required the 
railroad company to purchase the properties 
of the Empire Transportation Company as a con- 
dition of further business with it ; this also being 
refused, the Standard Oil Company at once ceased 
shipping over the Pennsylvania Railroad and its 
subsidiary lines, and induced the New York 
Central and Erie Railroads to engage in a rate 
war on oil shipments to harass the Pennsylvania 
Company. The reduced rates were met even to 
the extent of transporting oil at a loss. At the 
same time the Standard Oil Company made a 
big reduction in the price of refined oil in the 
war it declared against the two refineries the 
Empire Transportation Company was interested 
in, and wherever their oil was offered for sale the 
Standard oil could be had at less price. The 
business of the two refineries ceased to be profit- 
able, and there was no prospect of its being 
otherwise if the Standard continued its war 
against them. 

The Pennsylvania Railroad carrying for the 
Standard Oil Company represented two-thirds of 
its entire oil transportation and its loss proved a 
very serious matter, for during the period of its 



Trusts versus The Public Welfare. 101 

withdrawal the money loss to the railroad was 
a million dollars or more. The Standard had 
made its power felt, and the railroad company 
was humbled and ready to make terms, and be- 
fore the close of the year surrendered uncon- 
ditionally. Under the terms of surrender the 
Pennsylvania Railroad Company purchased all 
the tank and rack cars of the Empire Trans- 
portation Company, and the Standard Oil Com- 
pany bought the two refineries and its pipe-lines. 
When this transaction was completed the Stand- 
ard restored its full quota of shipments to the 
railroad company, who did not again revolt. 

Here ended the life of a great transportation 
company that had proved itself a benefactor to 
the independent oil men of Pennsylvania. Its 
destruction was instigated and accomplished by a 
set of men void of conscience in business matters, 
who regarded it an obstacle to their monopoly of 
the oil business of the United States ; a set of 
men who hold "the ends justify the means." At 
the present time the Standard Oil Company is 
operating two pipe-lines to New York and a line 
to each of the following cities: Philadelphia, 
Baltimore, Pittsburgh, Buffalo, Cleveland and 
Chicago. Considering these several lines, which 
pass over a great stretch of country, through 



102 Trusts versus The Public Welfare. 

many States, it appears that the right o£ eminent 
domain was not restricted whenever the interests 
of the great monopoly required its application. 

ABSORPTION OF INDEPENDENT REFINERIES BY THE 
STANDARD OIL COMPANY. 

Inordinate freight discriminations against in- 
dependent refiners and the cutting of prices by 
the Standard Oil Company in markets where 
their oil was for sale, made the business unprofit- 
able, and they fell an easy prey to their mighty 
adversary who purchased and dismantled many 
of their refineries. Other independent refineries 
were leased and shut down, and allowed to remain 
inactive, so as production could be kept down to 
a quantity that could be disposed of in our own 
and the world's markets, at such price as the 
Standard was satisfied to fix for it. 

Testimony before the Industrial Commission 
that the Pennsylvania Railroad Company refused 
to supply tank cars to independent oil men for 
transportation of crude oil to their refineries, or 
supplied them only occasionally in insufficient 
number, and would not allow them to use their 
own cars over its road for the purpose of carry- 
ing the oil to their establishments when it was 
urgently needed to keep them in operation was 



Trusts versus The Public Welfare. 103 

not disproved. This hampering of the business 
of the independent refiners was practised by the 
Pennsylvania Railroad Company with a view to 
profiting the Standard Oil Company, by which it 
was dominated, the object being to so dissatisfy 
and dishearten refiners that they would sell their 
refineries to the Standard and end their compe- 
tition with it. Mr. Emery, testifying upon this 
subject, said : " I owned a pipe-line in my coun- 
try, from my wells and other wells down to the 
railroad, and they refused to furnish me cars. 
The Pennsylvania Railroad owned 1,126 tank 
cars. I used them for a time until the order came 
from the Standard Oil Trust that I must get no 
more oil. Previous to this time they had been 
delivering my oil. With a great big refinery in 
Philadelphia and a railroad running through my 
land, I could not get a single car. I got one in 
a week, or one in two or three weeks, or one in 
four weeks, but I was deviled to death, until I 
had to quit.'' 

Mr. Emery's refinery and another large refinery 
close by it in Philadelphia were purchased and 
" torn down " by the Standard Oil Company. 

Another witness, one of a committee of inde- 
pendent oil men who called on Colonel Scott and 
Mr. Cassatt of the Pennsylvania Railroad to re- 



104 Trusts versus The Public Welfare. 

quest that cars be supplied for the transporta- 
tion of their crude oil, and to ask that they be 
put on an equality with the Standard Oil Com- 
pany in the matter of freight rates, testified that 
in the interview with them, "we told Colonel 
Scott that if they hadn't sufficient cars on their 
road we would like to put some on, and he told 
us flatly that they had just bought out one line 
and they would not allow another to be put on ; 
that if they hadn't cars enough they would build 
them." 

Such was the answer to men pleading for their 
rights to a public carrier that the law says must 
treat all shippers alike. The committee were 
denied cars, and the same freight rates granted 
the Standard Oil Company. 

In this day we can hardly conceive it possible 
that a few men so completely ruled a great rail- 
road company and dictated its policy as was done 
a few years ago by the Standard Oil Magnates ; 
but they were, and are, exceptional men who com- 
pelled obedience to their demands. Mr. William 
H. Vanderbilt testified before the Hepburn 
Committee, August 27, 1879, to the ability of 
these gentlemen to accomplish their designs when 
he said : " I think they are smarter fellows than 
I am, and if you come in contact with them I 




Trusts versus The Public Welfare. 105 

guess you will come to the same conclusion ; " 
and said further that " I don't believe that by 
any legislative enactment or anything else through 
any of the States or all of the States you can 
keep such men as them down." 

THE STANDARD OIL COMPANY (of to-day). 

Upon the dissolution of the trust in 1892 the 
nine gentlemen who had acted as trustees being 
owners of a majority of the companies in the 
trust organization reorganized and merged them 
into a corporation, the same Standard Oil Com- 
pany only the trustees eliminated. The 39 
companies that had combined in trust form came 
into the new corporation as 20 companies capital- 
ized at $102,233,700. The policies formerly 
pursued were unrelentingly continued, everything 
had to give way in the company's interest, and 
marked advantages over others engaged in the 
same business must be accorded the new com- 
bination. No competition of moment was brooked, 
means were promptly employed to suppress it. 
If a new oil-producing field was opened up Stan- 
dard Oil Company agents were instantly on hand 
to fix the price of the oil coming from its wells ; 
if a new pipe-line was laid the Standard paid a 
premium for the oil of the contiguous territory 



io6 Trusts versus The Public Welfare. 

and the line had no business and soon passed into 
possession of the big company ; if a refiner 
proved troublesome in any way, if he entered 
territory the Standard claimed as its own, and it 
claimed about all valuable territory, or if his 
business was markedly prosperous prices were cut 
until his business was destroyed and then his 
refinery was purchased and either closed or dis- 
mantled. Centralization of absolute power in the 
oil business must be achieved by the one great 
company regardless of the rights of others. 

One of those remarkably liberal charters issued 
by the State of New Jersey was obtained and in 
February, 1898, the Standard Oil Company, the 
present monopoly, was organized with capital 
stock still standing at $102,233,700, of which 
$52,455,200, represented the value of pipe-lines. 
In his testimony before the Industrial Commis- 
sion in 1899, Mr. George Rice, of Marietta, 
Ohio, a man who had suffered much and sus- 
tained large loss at the hands of the Standard 
Oil Company and who had devoted years of time 
in studying its methods and its affairs, stated that 
" during the ten years of the Standard Oil Trust, 
1882 to 1892, it paid out in dividends more than 
double its capital stock in 1888 (capital stock 
was then $47,830,200), and from March 21, 






Trusts versus The Public Welfare. 107 

1892, and including September, 1899, dividend, 
they have paid 30 quarterly dividends of 3 per 
cent, each, or 90 per cent in all, and paid 77 per 
cent, in specials (none of them paid prior to 
December, 1895), or a total of 167 per cent, on a 
capital of $102,233,700, a total of dividends in 
the Q{- years of $170,730,279. Larger dividends 
could have been paid had not earnings been used 
in purchasing producing properties." These 
dividends appear small compared with $141,- 
000,000 paid by the company in dividends during 
the three years 1900, 1901 and 1902, a sum 
amounting to $39,000,000 more than its capital 
stock, and many millions of dollars less than net 
earnings. 

The unscrupulous methods of the Standard Oil 
Company in removing a competitor from its 
path is again noted in the course it pursued in 
destroying the business of Mr. Rice, who had a 
refinery of 2,000 barrels capacity per week at 
Marietta, a little pipe-line leading from his wells 
in the Macksburg, Ohio, oil fields to the railroad 
where the oil was run into the one tank car he 
owned and then hauled to his refinery. As his 
oil was in demand in many markets and success 
was attending his efforts to extend and enlarge 
Jus business, the Standard determined to stop his 



108 Trusts versus The Public Welfare. 

sales and permanently close his refinery and thus 
end competition from that source. To that end 
Mr. O'Day, manager, notified the Cleveland and 
Marietta Railroad Company that was carrying oil 
to the Rice refinery, that he would not allow 
further shipments by the Standard Oil Company 
over that road unless big freight discriminations 
were conceded to it ; and declared his intention to 
build a pipe-line from the Macksburg field to 
Marietta unless his demands were complied with. 
Those demands were stated by Mr. Phineas Pease, 
receiver of the Cleveland and Marietta Railroad, 
to Mr. Rapello, general counsel of the road, in 
letter of February 25, 1885, in the following 
words : " But Mr. O'Day compelled Mr. Terry 
(the General Freight Agent) to make a 35 cent 
rate on all other oil going to Marietta, and that 
we should make the rebate of 25 cents per barrel 
on all oil shipped by other parties, and that the 
rebate should be paid over to them, the Standard 
Oil Company, thus giving us 10 cents per barrel 
for all oil shipped to Marietta and the rebate of 
25 cents per barrel going to the Standard Oil 
Company, $25 per day clear money on Mr. 
George Rice's oil alone." 

Mr. Rapello in reply to Mr. Pease, under date 
March 2, 1885, said : " The Standard Oil Com- 



Trusts versus The Public Welfare. 109 

pany threatens to store, and afterwards pipe, all 
oil under its control unless you shall make a 
uniform rate of 35 cents per barrel for all persons 
excepting the Standard Oil Company ; you shall 
charge them 10 cents per barrel for oil, and also 
pay them 25 cents per barrel out of the 35 cents 
collected from other shippers." 

At the command of the Standard Oil Company 
Mr. Phineas Pease, receiver of the Cleveland and 
Marietta Kailroad, " suddenly and without warn- 
ing advanced the freight rate on oil for Mr. Rice 
from 17^ cents per barrel to 35 cents per barrel 
for carrying it a distance of 25 miles over his 
road from the Macksburg field to Marietta, at the 
same time making the rate for the Standard Oil 
Company 10 cents per barrel for the same service, 
besides paying that company 25 cents per barrel 
on all oil transported by the road for him." There 
was no advance of rates to Marietta on any other 
merchandise, only on oil, and no increase of the 
rate to Parkersburg, 12 miles below Marietta on 
the Ohio River, where the Standard has a large re- 
finery. This act of the receiver was clearly in 
restraint of trade and in violation of the anti- 
trust law. 

Mr. Rice soon discovered the nature of the 
plot against him, and brought the matter to the 



no Trusts versus The Public Welfare. 

attention of Judge John Baxter of the United 
States court who granted him a private hearing 
in Chambers. Later on, in suit instituted for the 
removal of the receiver of the Cleveland and 
Marietta Railroad, Judge Baxter in rendering his 
decision, said : " Railroads are constructed for 
the common and equal benefit of all persons wish- 
ing to avail themselves of the facilities which they 
afford." Among the obligations a railroad in- 
curs under the terms of its charter and in accord- 
ance with the laws of the State is one " to carry 
for every person offering business under like cir- 
cumstances, at the same rate. If it were not so 
the managers of railways in collusion with others 
in command of large capital could control the 
business of the country, at least to the extent that 
the business was dependent on railroad transpor- 
tation for its success, and make and unmake the 
fortunes of men at will. 

" The discrimination complained of in this case 
is so wanton and oppressive it could hardly have 
been accepted by an honest man having due re- 
gard for the rights of others, or conceded by a 
just and competent receiver who comprehended 
the nature and responsibility of his office. 

" A good deal more might be said in condem- 
nation of the unparalleled wrong complained 



Trusts versus The Public Welfare, in 

of, but we forbear. The receiver will be re- 
moved." 

The amount of excess freight exacted from 
Mr. Rice by the receiver of the Cleveland and 
Marietta Railroad was restored to him. 

On July 16, 1886, various railroad companies 
increased the freight rates on oil shipped, and to 
be shipped, by Mr. Rice from Marietta to Mem- 
phis and New Orleans " from 43 to 162 per cent." 
without advancing the Standard Oil Company 
freight from Parkersburg ; prior to that time the 
rates were the same from both places. 

This advance in freight rates " closed nineteen 
out of twenty-four Rice agencies and shut him 
out of thirty-nine towns in five months." 

Mr. Rice advanced abundant evidence, when 
testifying before the Industrial Commission, to 
prove that the Transcontinental Freight Associ- 
ation in December, 1888, engaged with the Stand- 
ard Oil Company to fix on a certain day that 
month a 90 cent per 100 pounds rate on petro- 
leum and its products from Cleveland and Pitts- 
burgh to the Pacific coast, and to advance the 
rate to $1.25 on January 1st, ten or twelve days 
later. This secret understanding was had with a 
view to the Standard stocking up its Pacific coast 
agencies with a liberal supply of oil; it would 



ii2 Trusts versus The Public Welfare. 

enable the Company to load their cars and have 
them ready to move when the lower rate went into 
effect, while the independent refiners in ignorance 
of the low rate shortly to be named, and the 
purpose of the railroads to establish the higher 
rate a few days later would be able to get off only 
a limited quantity of oil before the $1.25 rate 
was fixed. This collusion insured a very great 
advantage to the Standard Oil Company over 
competitors, as the difference in freight in its 
favor put it in a position in which it could under- 
sell them and monopolize the business in that 
section of country. In this flagrant discrimina- 
tion against independent refiners it is apparent 
that the influence of the Standard Oil Company 
with railroads was not restricted to those east of 
the Mississippi River, but extended to leading 
lines from Maine to California, and from our 
northern boundary to the Gulf of Mexico. It 
shows indubitably that the railroads stood ready 
when called on to assist the Standard Oil Company 
in its work of destroying competition. 

The railroad agents on this occasion were so 
solicitous of the welfare of the Standard that they 
offered to renew the agreement whenever the 
coast agencies of the company needed stocking 
up. 



Trusts versus The Public Welfare. 113 

This secret agreement with the railroads was 
one of the methods employed by the Standard 
Oil Company to avoid infringement of the Inter- 
State Commerce law then in effect ; the scheme 
was eminently successful. 

Mr. Rice also stated that he was virtually shut 
out of the market in all directions on crude and 
refined oil and their products through freight 
discrimination and was forced to close his re- 
finery on that account in 1896 and had not 
opened it since. 

PRICE CUTTING BY THE STANDARD OIL COMPANY. 

The cutting of price is another of the Standard 
Oil Company's methods to drive a competitor out 
of business and it has proved a most effective one. 
No independent refiner must presume to enter 
a market in which the Standard is doing business, 
the field is not broad enough for two and at any 
and every cost the newcomer must be forced to 
abandon his efforts to introduce and maintain 
his oil in it. This is illustrated in the case of 
the Pure Oil Company, that placed its wagons on 
the streets of New York city in March, 1896, to 
sell its oil to consumers and retail dealers. At 

the time this occurred the Standard Oil Com- 

8 



ii4 Trusts versus The Public Welfare. 

pany was selling Water White oil from its 
wagons in that city at 9 to 9^ cents per gallon. 
On March 9th the Pure Oil Company started its 
wagons out with the price fixed at 9 cents, which 
was highly profitable for both companies. The 
Standard immediately cut the price to 8 cents, 
then to 1\ and 7 cents, and continued to run the 
price down until it reached 5^ cents per gallon 
in July. The cost of producing a gallon of oil 
was not lessened in any way during that period, 
but a competitor had to be driven out of the 
market and the 5^ cent price did it. When 
competition ended, prices were restored and losses 
made good. Identically the same course was 
pursued in Philadelphia with the same result. 
Mr. Emery testified in 1899 that he lost $150,- 

000 in Philadelphia in lowering the price from 
time to time in competition with the Standard 
Oil Company in his efforts to do business there, 
and had to quit ; and " not four weeks ago when 

1 sent my oil to a certain point the market price 
was reduced one cent a gallon." 

" Whenever they know your oil is on the way 
to a particular market they will cut the price 
before you get there." 

A number of instances of price cutting by 
the Standard Oil Company to destroy competition 



Trusts versus The Public Welfare. 115 

and monopolize markets are on record in the 
testimony before the commission which show 
that it will reduce prices to the cost of delivery 
if necessary, to prevent a competitor from gain- 
ing a permanent foothold in a market. At 
Auburn, New York, the price was run down to 
" about 2 cents " in the competitive struggle. 
It is a well-known fact that the prices of the 
Standard Oil Company are much lower at com- 
peting points than they are where there is no 
competition, though those points are but a few 
miles apart. 

Mr. M. L. Lockwood in his testimony before 
the commission, referring to the methods of the 
Standard Oil Company to maintain its business 
and destroy competition, said that when he was 
in the town of Wichita Falls, Texas, in 1888, he 
was told by a leading merchant of that place, who 
had been buying oil regularly from the Standard 
Oil Company that he placed an order for a car 
load of oil with an independent oil man, who 
called on him, because he thought his oil was of 
better quality than he had been getting. The 
morning after the oil arrived at Wichita Falls the 
Standard's representative from Fort Worth visited 
his store and insisted that he must buy oil only 
of the Standard Oil Company, and threatened in 



n6 Trusts versus The Public Welfare. 

the name of that company to establish a store in 
the town and run him out of business if he per- 
sisted in buying and selling the oil of independ- 
ent refiners. The merchant, fearing his business 
would be ruined unless he complied with what 
was demanded of him, promised to confine him- 
self thereafter to the Standard oils, and since 
then has bought exclusively of them. In all 
parts of the country the power of this great 
corporation has been made manifest, it appears 
it cannot be withstood. 

In hope of obtaining the privilege of doing 
business, a right every American citizen has a 
just claim to, Mr. Thomas W. Phillips and other 
independent oil men called on officials of the 
Standard Oil Company, and asked that hostilities 
between them cease, both as to piping and selling 
oil, and that the independent oil men be allowed 
to deliver oil in New York without encountering 
the opposition of the Standard Oil Company. 
Their request was denied by the Standard of- 
ficials, who then suggested the sale of the inde- 
pendent pipe-lines and producing property to 
their company and thus avoid all trouble ; this 
proposition the visiting delegation declined to 
entertain and the conference ended. 



Trusts versus The Public Welfare. 117 

STANDARD OIL COMPANY'S MEANS OF OBTAINING 
INFORMATION. 

Securing information of the business of com- 
petitors has been a policy closely adhered to by 
the Standard Oil Company throughout its ex- 
istence, it mattered not how questionable the 
means resorted to, to obtain it, the ends in their 
opinion justified the means, as the business of 
an opponent could be injured quicker and more 
effectively by the company having knowledge of 
it. In this connection Mr. Monnett, Attorney 
General of the State of Ohio, testified that the 
Standard Oil Company made a practise of bribing 
clerks and employes of competitors to report daily 
the details of the business of their employers, the 
cost price of the product, amount of oil shipped 
and to whom shipments were made, the names 
of the customers of their employers, etc., and 
stated that a man employed by Schofield, Schur- 
mer and Teagle of Cleveland was engaged by 
the Standard at a monthly salary to supply such 
information. Another witness affirmed that the 
Standard Oil Company is accurately advised daily 
of the shipments of petroleum and its products 
by competitors, the names of consignee and 
consignor, amount shipped, and the destination of 
shipments, either by the railroad company, some 



n8 Trusts versus The Public Welfare. 

local agent of the road, or some subsidized em- 
ploye of the independent concern. Mr. Charles 
B. Mathews of Buffalo, New York, in affidavit 
to the Industrial Commission said that, " Lane 
Borell, an employe of my company, was, in the 
secret service of the Standard interests, who paid 
him a higher wage for making daily reports of 
our sales, customers and business, than we paid 
him for work in the refinery. These reports 
were mailed direct to S. C. T. Dodd, the Stand- 
ard attorney." 

Mr. Lewis Emery in his testimony declared 
the practise of reporting shipments of the inde- 
pendent refiners to the Standard Oil Company 
was in vogue as late as 1898 to his personal 
knowledge, as shipments made from his refinery 
at that time were reported at once. 

Others gave in similar evidence to prove con- 
clusively the debauching by the Standard Oil 
Company of the officers or agents of railroad 
companies and employes of independent refiners to 
betray the business of its competitors. 

METHOD OF OBTAINING OIL PRODUCING PROPERTY. 

The methods practised by the Standard Oil 
Company to get possession of oil-producing prop- 
erty were laid bare by Mr. M. L. Lock- 



Trusts versus The Public Welfare. 119 

wood in his testimony before the Industrial 
Commission. In answer to questions upon 
this subject he said when oil was first produced 
in Ohio it had ready sale at a net price of 40 or 
50 cents a barrel at the wells (barrel not in- 
cluded). At that price the producers were pros- 
perous and contented. Coveting this producing 
property and determined to possess it, the Stand- 
ard Oil Company induced the railroad companies 
to revise freight rates on oil so as the net price 
at the wells shrunk to 15 cents per barrel where 
it was held for a lengthened period during which 
many producers, completely discouraged, as their 
business was no longer profitable, surrendered 
themselves victims to the rapacity of the great 
oil-refining monopoly that purchased 55 per cent, 
of the capacity of the oil fields. While the 
Ohio (Lima) petroleum is inferior in quality to 
the Pennsylvania product, it is a source of large 
revenue to the Standard Oil Company who pump 
the output of the wells through its Buckeye Pipe 
Line to the refineries at trifling cost. 

Mr. Lockwood also said that in 1896 or 1897 
the Standard Oil Company bought largely of the 
oil-producing lands of Pennsylvania and West 
Virginia at low prices after depressing the price 
of oil with that object in view. " This was just 



120 Trusts versus The Public Welfare. 

before the great rise which occurred after they 
had bought all the property they could.'' After 
the purchase of these lands both crude and refined 
oil were advanced to a high price and consumers 
thus taxed to pay for the lately acquired prop- 
erty; a policy that has been uniformly carried 
out by the Standard for twenty years or more. 

NO MARKET PRICE FOR CRUDE OIL. 

There has been no market price for crude oil 
(as established for other commodities) since Jan- 
uary 23, 1895. On that day the Standard Oil 
Company began posting daily quotations for crude 
oil at the office of Joseph Seep, its oil-purchasing 
agent at Oil City, Pennsylvania, who has under 
him about 50 sub-agents who are to be found in 
the various oil fields of the country guarding the 
interests of their employers. No quotation other 
than posted by the Standard obtains in the 
United States and Canada. The price for crude 
petroleum is fixed from day to day by it, and that 
price governs all buyers throughout the oil re- 
gions of America. 

FREIGHT DISCRIMINATIONS AND UNDERBILLING OF , 
TANK CARS. 

Charges were freely made before the Industrial 
Commission and in some instances substantiated 



Trusts versus The Public Welfare. 121 

by satisfactory evidence, that certain railroads, 
especially the Pennsylvania Railroad, discrimi- 
nated in freight rates in favor of the Standard Oil 
Company since the passage of the Inter-State 
Commerce law, in April, 1887, which imposed a 
penalty of $5,000 and two years' imprisonment for 
granting rebates or discriminating in other ways. 
There is but little evidence to prove that the law 
has been violated since it went into effect, but 
much to impress one that it has been generally 
observed. Whatever advantage the Standard 
has gotten in the way of lower freight than 
others has been secured in an indirect manner ; 
there is evidence to show that this has been done 
in numerous instances. One of the direct means 
employed to favor that company, according to 
the testimony of Mr. Theodore B. Westgate, of 
Titusville, an independent oil refiner, a credible 
witness and reputable gentleman, was in the bill- 
ing of tank cars at a minimum of 24,000 pounds 
when the actual weight was from 44,800 to 
46,000 pounds. The freight bills for three such 
shipments having been shown to him he was in 
a position to speak authoritatively upon the 
subject. It is also to be fully credited that the 
Pennsylvania Railroad Company was guilty of 
rank freight discriminations in favor of the 



122 Trusts versus The Public Welfare. 

Standard Oil Company after the passage of the 
Inter-State Commerce law by its compromising 
suits brought against it for excess freight charges 
over rates conceded the Standard. Logan, Emery 
and Weaver instituted suit before the Inter-State 
Commerce Commission, charging the Pennsylvania 
Railroad Company with allowing rebates to the 
Standard Oil Company from April 4, 1887 (date 
of passage and approval of the Inter-State Com- 
merce Law) to July 1, 1888. That suit was com- 
promised in 1890, when it was still before the 
Court, by the railroad company paying Logan, 
Emery and Weaver the sum of $35,000, and all 
costs, with the understanding that they would not 
bring other suits against the company, as they 
had charged that rebates had frequently been paid 
by it to the Standard Oil Company since July 1, 
1888. 

Other independent oil men had brought similar 
suits against the Pennsylvania Railroad Com- 
pany, all of which were compromised upon pay- 
ment of large sums of money to the complainants. 
It is, therefore, certainly fair to presume that 
these several suits would not have been settled 
by the railroad in the manner they were if it had 
not been guilty of the charge preferred against 
it; if innocent the suits would have been con- 



Trusts versus The Public Welfare. 123 

tested and carried from court to court if neces- 
sary. Since the time these suits were filed there 
is no actual proof of any railroad company directly 
granting rebates to the Standard Oil Company, 
but, as remarked before, there is evidence of 
freight discrimination in underbilling shipments 
for it, and widespread belief among oil men 
that the railroads indirectly favor it. 

THE STANDARD OIL COMPANY IN CANADA. 

Prior to October 1898 our independent refiners 
had a good outlet for their oils in Canada. To 
deprive them of that market and to extend its 
power over all North America the Standard Oil 
Company, in July of that year, purchased the 
capital stock of the Imperial Oil Company of 
Canada and continued the refining and producing 
business there in the name of the purchased com- 
pany, and refines every gallon of petroleum that 
is refined in the Dominion. After taking over 
the Canadian refineries the Standard induced the 
railroad companies transporting oil from the 
United States to Canadian points to make a 
material advance in freight rates for that service, 
which was done in October, the most important 
being the increase from Buffalo to Montreal from 
23 cents per 100 pounds to 35 cents per 100 



124 Trusts versus The Public Welfare. 

pounds. This advance and other discrimina- 
tions, in conjunction with an import duty of 5 
cents a gallon on refined oil imposed by the laws 
of Canada, barred the oils of our independent 
refiners out of that country and gave the Stand- 
ard absolute control of its markets. The prin- 
cipal railroads of the Dominion soon came under 
the controlling influence of the Standard, and the 
broadest discriminations in its behalf in freight 
rates applying to all local points were allowed 
against any and all oils that might find entry 
into Canada, or that were owned there at the 
time of the agreed freight concessions to it. 
This was made plain in the testimony of Mr. 
Andrew D. Gall, oil merchant of Montreal, before 
the Industrial Commission in November, 1899, 
when he said, to test the question of local freight 
discriminations against oil from the United States 
he made a shipment from Montreal to La Shutte on 
which the freight charge was 17 cents per 100 
pounds on the Canadian oil and 24 cents per 100 
pounds on the American (U. S.). On a shipment 
of each kind to St. Johns, Quebec, the Canadian 
oil was freighted at 12 cents pkr 100 pounds, while 
the American was billed at 24 cents per 100 
pounds. When the oil was delivered to the rail- 
road company for shipment Mr. Gall's represen- 



Trusts versus The Public Welfare. 125 

tative was required to say " whether it was 
American or Canadian, and the freight bill was 
made up accordingly." 

Contending with hostile freight discriminations 
on their oil from the place of production to the 
markets of Canada, and with inordinate freight 
rates imposed upon every barrel of it shipped by 
Canadian jobbers to their customers, the cause of 
the independent refiners was hopeless, and they 
abandoned the Dominion to the tender mercies of 
the Imperial Oil Company, owned and operated 
by the Standard Oil Company, which has since 
had a monopoly of the business. 

The retail price of refined oil in Canada in 
May, 1898, about two months before the Standard 
Oil Company acquired the properties of the 
Imperial Oil Company, was Vl\ cents per gallon, 
and crude oil selling at $1.40 per barrel. On 
January 1, 1899, refined oil stood at 14 cents a 
gallon, while the crude oil remained at $1.40 a 
barrel. In November, 1899, the price of refined 
had been advanced to 17^ cents per gallon and 
the crude to $1.60 a barrel, an advance of 5 
cents per gallon on refined and less than a half 
cent per gallon on the crude oil since the Stand- 
ard Oil Company took possession of the Cana- 
dian refineries some 16 or 17 months before. Was 



126 Trusts versus The Public Welfare. 

there anything other than greed and the power 
the Standard Oil Company possessed to compel 
consumers to pay any advance it was pleased to 
demand that warranted this increase of 5 cents 
per gallon for refined oil when the crude had 
advanced less than a half cent per gallon ? As 
the cost of refining crude petroleum does not 
exceed a half cent per gallon, to which must be 
added about 5 per cent, loss that occurs in the 
process of refining, the price charged for refined 
oil in the years past, and at present, makes the 
fabulous net earnings of the Standard Oil Com- 
pany clear to our understanding. 

The Canadian dealer can buy oil of the Stand- 
ard Oil Company, in Canada, only on condition 
that he will not buy oil of any other refiner. 

Hon. Franklin B. Gowen, President of the 
Philadelphia and Reading Railroad Company, 
a man who stood the good and loyal friend of 
the independent oil producers and refiners when 
other railroad companies were leagued against 
them in effort to destroy their business in the 
interest of the Standard Oil Company, when before 
the Inter-State Commerce Commission in January, 
1888, denounced the practise of granting freight 
discriminations and rebates to the Standard, 
and the result of such treatment of indepen- 



Trusts versus The Public Welfare. 127 

dent refiners and producers, in the following 
words : 

" The system of illegal and unjust railroad 
rebates or freight discriminations, more than any 
other social evil, has been the source of that 
unequal distribution of wealth which to-day con- 
fronts the country with a menace greater than 
threatened by any other wrong or inequality. 
The Standard Oil Trust owes its control of the 
oil trade of the country entirely through unjust 
and illegal discrimination in charges of railroad 
freights. Nearly all of its great wealth and 
power have been thus dishonestly and illegally 
obtained. It is far the most conspicuous example 
among the many instances of the great fortunes 
made by the favoritism of railway officials." 

These weighty words were uttered by a high 
railway official, an honorable, patriotic citizen, 
who knew whereof he spoke, who had a just con- 
ception of the outrages perpetrated upon inde- 
pendent oil refiners and producers by the rail- 
roads and the Standard Oil Company, who looked 
into the future and gave warning of the menace 
the " unequal distribution of wealth is to us," 
who realized that the centering of vast wealth in 
the hands of the few would ultimate in the op- 
pression of the people, in the degradation of 



128 Trusts versus The Public Welfare. 

wage-earners, and who had the courage to de- 
clare that the great wealth of the Standard Oil 
Company " has been dishonestly and illegally 
obtained." His words should be pondered by 
every good citizen, by every well-wisher of his 
countrymen, and impel them to insist in the 
most positive terms that the great industrial 
combinations be brought under rigid national 
control and supervision, and that they be stripped 
of the power they possess to destroy competition, 
regulate, or limit, production, fix prices for 
raw materials, and exact immoderate prices for 
their manufactures. 

GENERAL REMARKS ON THE STANDARD OIL COM- 
PANY, ITS DEEDS AND MISDEEDS. 

In studying the many hundred pages of testi- 
mony advanced by oil producers, independent re- 
finers, pipe-line people, Standard Oil Company 
officers, employes and others, one is profoundly 
impressed with the arrogance of the Standard 
Oil Company, and the power it has secured by 
the unscrupulous and utterly heartless employ- 
ment of the great wealth at its command to at- 
tain its ends. There is told the history of the 
discovery of petroleum in the wilds of Pennsyl- 
vania; of the drilling of the first well by Colonel 



Trusts versus The Public Welfare. 129 

Drake, and the output of oil from it ; of the 
coming in of a host of energetic and enterprising 
men to develop the producing power of the oil 
territory ; of the vast amount of money they ex- 
pended in sinking wells and laying pipe-lines; 
of the difficulties they experienced in storing and 
saving the oil ; of the great cost of getting their 
oil to market because of lack of transportation 
facilities ; of the trials and hardships they en- 
dured in a country remote from settlements and 
void of the comforts and refinements of life they 
were accustomed to, and of their struggle against 
the great aggregation of capital represented by 
the Standard Oil Company and great trunk lines 
of railroads that had conspired to destroy them 
root and branch. 

There is told the history of the successful de- 
velopment of the oil regions by those forceful 
men, and the remarkable progress they made up 
to 1872 when the power of the conspirators was 
first made manifest; of their surmounting the 
hindrance of high cost of transportation by the 
establishment of pipe-lines throughout the oil 
fields and leading to the railroads ; of the build- 
ing and operating of a large number of re- 
fineries, 90 of them were located in the oil regions 
in 1869 ; of the success they had in refining the 



130 Trusts versus The Public Welfare. 

crude petroleum and the discovery of bi-products ; 
of the lessening of the price of refined oil as cost 
of transportation was reduced and they gained 
knowledge and skill in refining ; of the intro- 
duction of their oil into foreign countries, and 
their determination to avail themselves to the 
fullest extent of that outlet ; of the efforts made 
by them to build pipe-lines through to the sea- 
board and the means employed by their enemies 
to prevent their building them ; of the money 
loss and bankruptcy of many of the pioneer pro- 
ducers, and how, after innumerable trials and 
troubles had been overcome and the future bright 
and promising for their business, a systematic 
course of obstruction and oppression was in- 
augurated by the Standard Oil Company and 
trunk lines of railroads to bring about their down- 
fall. Their crude oil was forced down to an 
unprofitable price and held there until heart was 
taken out of producers continuing their work 
and they were glad to sell their lands to the 
Standard Oil Company, a ready buyer, who be- 
came a producer upon a large scale. The ter- 
ritory in which the independent refiners offered 
their oil for sale was restricted year after year 
by means of the cutting of price to an unprofit- 
able basis or below cost of production by their 



Trusts versus The Public Welfare. 131 

powerful competitor, their refineries were bought 
up by it and destroyed, and the pipe-lines were 
purchased by their enemy and turned against 
them. The few remaining independent petro- 
leum refineries in the United States to-day are 
permitted to exist at the will of the giant mono- 
poly, the Standard Oil Company. 

There were many able and experienced men 
engaged in refining petroleum as determined as 
the Standard Oil Company to build up a large 
business with foreign countries and to extend it 
over the world. There is no doubt that they 
would have been as successful as the Standard 
as a large number of them would have been 
striving for that business and they would have 
urged the sale of every barrel of oil they could 
have found a market for. In the matter of 
domestic consumption it is not for a moment to 
be presumed that there would have been a gallon 
less oil used if there had been a large number of 
sellers instead of one, and beyond question our 
people would have purchased oil at less price 
when many refiners were competing for business 
than they have paid the Standard Oil Company 
for it. It would certainly have been to the best 
interest of our country and people if the many 
could have continued their refineries, as the 



132 Trusts versus The Public Welfare. 

demands of many buyers for supplies of crude oil 
would have insured a better price for it to pros- 
per producers, and by reason of the competition 
of numerous sellers of refined oil immoderate 
profits could not have been wrested from con- 
sumers as has been done by the one refining 
company dominating the market- Besides this, 
the greater number of refineries would have em- 
ployed in the several departments of the business 
a far greater number of persons than have been 
in service in them, and the additional wages 
would have been expended to enter into circu- 
lation to the advantage of the community. 
Competition always benefits a people, monopoly 
always oppresses them. 

Refiners of large practical knowledge of the 
oil business when testifying before the Industrial 
Commission denied that the Standard Oil Com- 
pany can produce a gallon of refined oil at more 
than a trifle less cost than they can and not to 
an amount to have weight in fixing its selling 
price to consumers. They concede the facilities 
of the Standard give it a very considerable ad- 
vantage in the manufacture of bi-products, which 
are of much value, and maintain that advantage 
would not have been had if the independent 
refiners could have prosecuted their business free 



Trusts versus The Public Welfare. 133 

from molestation and oppression. Extortionate 
profits have been realized for many years past 
on refined oil, benzine and other products of the 
manufacture of petroleum as is abundantly evi- 
denced by the fabulous dividends paid by the 
Standard Oil Company, and these dividends in 
nowise covering net earnings as millions of dol- 
lars annually were invested in producing and 
refining property or placed to the credit of the 
surplus fund account, etc. No such profits are 
legitimate and they could not be secured under 
the condition of effective competition. While 
the gallon of refined oil costs the consumer only 
a small amount of money, the excess price applied 
to the multiplied millions of gallons consumed 
every year will aggregate a great many millions 
of dollars. The destruction of competition means 
robbery of the people. 

The Standard Oil Company monopoly seized 
the opportunity to deprive others of the fruits of 
their labor and was successful in doing it. The 
idea of building pipe-lines in the oil fields to 
gather the output of the wells, and to the rail- 
roads and seashores by means of which trans- 
portation charges were reduced to the minimum 
did not originate with it, neither did the manu- 
facture of certain valuable bi-products now 



134 Trusts versus The Public Welfare. 

important articles of commerce. Independent 
oil men established a great network of pipes in 
the oil fields and to the railroads before the Stand- 
ard recognized their value, and pipe-lines reached 
out towards the seaboard before the company 
believed the transportation of oil to distant points 
by that means practicable. The independents 
were as prompt to adopt the best and latest pro- 
cesses of refining as was the Standard, and were 
ever on the alert to avail themselves of every 
means of advanced manufacture. 

The mighty Standard Oil Company with $500.- 
000,000 accumulated capital is without doubt 
a menace to the public welfare. 

THE SUGAR TRUST. 

The Sugar Refineries Company was organized 
August 6 1887 under charter granted by the 
State of New York and merged 18 of the 21 
sugar refineries then in existence in the United 
States ; the Havemeyers at the head of and 
managing the affairs of the combination. At 
the time of the merging of these refining com- 
panies their aggregate capital stock was about 
$6,590,000. " Without the addition of a build- 
ing, a piece of machinery or anything else, 7 ' the 
capital stock of the Sugar Refineries Company 



Trusts versus The Public Welfare. 135 

was established at $50,000,000, the excess stock 
being based on good-will, trade-marks and in- 
creased earning capacity. It is remarkable how 
valuable " good-will, trade-marks," etc., of indi- 
vidual companies become when they come into 
possession of one of these modern industrial com- 
binations that absolutely controls the market for 
the manufactures they apply to. If our people 
think the pretext of great value claimed for these 
things under the condition of monopoly by means 
of combination has a shadow of foundation they 
are indeed credulous ; the claim is made solely for 
the purpose of giving a base to a torrent of watered 
stock, the swelling of $6,590,000, the value 
of the properties merged, to $50,000,000 stock 
of the combination upon which consumers of 
sugar must pay liberal dividends. Immediately 
after the organization of the trust in 1887, the 
price of sugar was advanced a half cent per pound, 
and as much as one cent per pound in 1888 and 
1889 ; a very large profit on the enormous out- 
put of the company. 

When a member of the Industrial Commission 
asked Mr. Henry Havemeyer if he did not think 
the people had a right to know something about 
the value of stock issued by a corporation char- 
tered by a State and have that stock subject to 



136 Trusts versus The Public Welfare. 

inspection so that they may not buy it blindly, 
replied he did not, " Let the buyers beware. You 
cannot wet-nurse the people from the time they 
are born until they die, they have got to wade 
in and get stuck." 

So say the men at the head of all the great com- 
binations that have flooded the country with 
many hundred millions of dollars of stocks that 
have not a dollar of tangible assets back of them. 

In the case of the sugar trust there was an 
issue of stock amounting to $43,410,000, that 
was not sustained by a dollar of cash or property 
of real value paid in by stockholders or any one 
else, and this fact Mr. Havemeyer was averse to 
imparting to the public. 

The companies that entered the Sugar Kefin- 
eries Company assigned their stock in trust to a 
board of eleven trustees and received trust cer- 
tificates in lieu of it, and vested in said board the 
voting power of the certificates. 

Seven of the plants that were merged into this 
company were immediately shut down and one 
was dismantled and the real estate sold. The 
business of the trust was in a highly prosperous 
condition when the courts of New York declared 
it an illegal combination in restraint of trade and 
ordered its dissolution. A company composed 



Trusts versus The Public Welfare. 137 

of the same people who had been conducting the 
affairs of the trust was then organized under the 
laws of the State of New Jersey as the 

AMERICAN SUGAR REFINING COMPANY. 

The American Sugar Refining Company 
bought the properties of the companies in the 
trust organization, paying therefor the stock of 
the new company whose capital stock was fixed 
at $50,000,000, divided into $25,000,000, 7 
per cent, cumulative preferred and $25,000,000 
common stock. In 1892 the company bought 
four large refineries in Philadelphia and vicinity 
whose capacity was equal to one third of the 
sugar output of the country, and also purchased 
a large proportion of the stock of the Baltimore 
Sugar Refining Company. At this time an issue 
of $25,000,000 of new stock was authorized of 
which $23,546,000, one half preferred, the other 
half common, was used in payment for the four 
refineries and the Baltimore Refinery stock, thus 
increasing the capital stock of the company to 
$75,000,000. 

In 1896 about all of the minority stock of the 
Baltimore Refining Company was acquired, thus 
placing that property wholly in the hands of the 
American Sugar Refining Company. A further 



138 Trusts versus The Public Welfare. 

issue o£ stock amounting to $15,000,000 in 1901, 
increased the capital stock of the company to 
$90,000,000 where it now stands. 

After the organization of the American Sugar 
Refining Company and coming into possession 
of the plants of its constituent companies, all 
plants not considered necessary to operate were 
dismantled and hands discharged. Later the re- 
fining business of the company was concentrated 
in six or seven large refineries whose product, 
or output, was equal to all the refineries that had 
been taken over on the formation of the company. 

The policy of the company is to shut down 
some of their refineries when there is slack 
business and operate the others to their full 
capacity, thus reducing the cost of the product to 
the lowest possible point. Minimum cost of 
production is attained only by working full time 
and employing every piece of machinery and 
appliance in the refinery, hence the concentration 
of work in a few plants. The refineries owned 
by the American Sugar Refining Company in 
1899, when this testimony was taken, with 
capacity of 45,000 barrels of sugar per day and 
daily production of only 30,000 barrels, about 
90 per cent of the output of the country, were 
located in different parts of the country to give 



Trusts versus The Public Welfare. 139 

it advantages in distributing the product to 
consumers. The cost of building all the plants 
of the company, if contracted for in June, 1899, 
when Mr. Havemeyer was before the Industrial 
Commission (iron and steel then selling at the 
highest price known in a great many years, and 
all building materials at the highest price we 
have knowledge of for twenty years or more past) 
would have been, according to his very high esti- 
mate, $30,000,000 including the cost of the 
lands they occupy which, independent of working 
capital, is about one third of the capital stock of 
the company, and including working capital not 
a dollar in excess of one half its capital stock. 

AMERICAN SUGAR REFINING COMPANY TRADE 
MARKS AND COMPETITION. 

The methods employed by the American 
Sugar Refining Company to destroy the com- 
petition of the four refineries in Philadelphia 
and vicinity and the Baltimore Refining Com- 
pany which were purchased by it in 1892 in 
order to get them out of the way as competitors, 
and of Spreckles, Doscher, and Arbuckle Brothers 
who started up their refineries in the latter part 
of 1898 and entered the market with unknown 
brands, simply with sugar of good quality which 



140 Trusts versus The Public Welfare. 

they offered to sell, not at cut prices, hut at the 
prevailing market price, does not impress one with 
the potency and value of the Havemeyer and 
Elder brand which Mr. Havemeyer placed in the 
intangible assets of the company at a valuation 
of $35,000,000. 

The war of cut prices he inaugurated and 
maintains against certain of these competitors 
proves conclusively that the brand that he esti- 
mates at such fabulous value is not relied upon 
to hold the market against even limited com- 
petition on the basis of equal prices, and shows 
the humbuggery practised by his company in 
giving high value to it, and the general claim of 
extraordinary value placed on good-will, trade- 
marks, etc., when controlled by trusts or com- 
binations. As soon as these independent re- 
fineries started to manufacture sugar and to 
solicit business, the American Sugar Refining 
company cut prices, thus showing lack of con- 
fidence in the efficacy of its trade-marks. The 
Mullenhauer refinery and the Nash and Spauld- 
ing Refining Company of Boston have been 
working in harmony with the American for years, 
and the same can be said in late years of the 
Claus Doscher refinery. 

The American Sugar Refining Company now 



Trusts versus The Public Welfare. 141 

owns one half of the Western Sugar Refining 
Company, and would hardly make war on that 
concern, but it is on with Arbuckle Brothers 
and it is apt to be kept up against them indefi- 
nitely. Hawaiian planters now have a refinery in 
California ; they, with McKean of Philadelphia, 
Cunningham of Galveston, and Henderson and 
Cogswell of New Orleans, completing the list of 
independent refiners, will hardly escape plenty 
of trouble in competing with the American for 
business. 

During 1901 and 1902 drastic measures were 
used by the American Sugar Refining Company 
to drive a competing refiner from the territory 
along the Missouri River where he had a good 
market for his beet sugar. During the contest 
which was hotly waged from the beginning the 
American cut the price of refined sugar to a 
half cent per pound below the cost of raw cane 
sugar in New York and far below the cost of 
producing beet sugar. When this occurred the 
beet sugar refiner surrendered and abandoned 
the Missouri River territory to his powerful 
antagonist. This price-cutting scheme is the 
most effective of any yet discovered by the trust 
to destroy competition ; the contest is unequal, 
and in prolonging it the weaker combatant, the 



142 Trusts versus The Public Welfare. 

independent refiner, not only loses his business 
in the disputed territory, but finds himself finan- 
cially ruined. 

After disposing of a competitor prices are 
restored, or advanced beyond those prevailing 
when the war for supremacy in the market began, 
and losses are soon restored. 

It is obvious, from the testimony of Mr. Henry 
Havemeyer, that the purpose of the Sugar 
Refineries Company, and, later, the American 
Sugar Refining Company, was to secure abso- 
lute control of the sugar refining business in 
the United States, and he, and those associated 
with him, did not intend to submit to competition 
that would defeat the attainment of their ends. 
In his testimony before the Lexow Committee he 
said that one of the objects of the sugar trust 
was the control of the output and the price of 
sugar. That also was the object of the later 
organization, " and they have come mighty near 
doing it," he told the Industrial Commission, and 
further informed the members of that body that 
" by reason of controlling 80 per cent, of the pro- 
duct of sugar in the United States we undoubtedly 
control output and prices." 

When asked by a member of the Commission, 
" Does not your combination take a good deal 



Trusts versus The Public Welfare. 143 

of independence out of competitors who were 
pretty independent previously/' replied : " You 
bet we do." A flippant and arrogant answer 
that should arrest the attention of all thoughtful 
patriotic citizens and warn them of the necessity 
of restraining aggregated wealth in the form of 
trusts, or combinations, from depriving our people 
of the right to engage in and carry on any law- 
ful business, of the high importance it is to us 
that they be absolutely deprived of their power 
to molest any firm or corporation engaged in 
competitive manufacture. It should be mani- 
fest to our people that their best interests are 
promoted by competition in business, and that it 
should be maintained. 

Mr. Havemeyer was asked if there was any 
difference, in his judgment, in the competition 
between one of the great combinations and its 
few competitors and the competition between 
individual firms and corporations. His reply was : 
" The stock of the big corporation is in the hands 
of the public, while in the other case the indi- 
vidual owns it all. I think the public if it chooses 
to become interested in the American Sugar 
Refining Company stands a pretty good chance 
of knocking out a man who has all his money 
in one thing." 



144 Trusts versus The Public Welfare. 

Very true. The capital stock of a trust, or 
combination, is not owned by one, two or three 
persons but by many persons who are concerned 
only in dividends being paid to them at an ap- 
pointed time. During the period of prosperity 
the country is now passing through the managers 
of combinations will pay dividends whether 
earned or not and stockholders will be kept in a 
happy frame of mind, the reserve fund can be 
drawn upon for that purpose. Shareholders are 
thus made content, and the managers of the 
business are permitted to conduct it as their 
judgment dictates. With great capital and the 
control of 80 to 90 per cent, or more of the 
business of the country in their particular line of 
manufacture to sustain them they are all-power- 
ful in a war of prices against a competitor, his 
downfall is certain and competition is swept aside. 
The loss incurred in effecting this does not affect 
either the capital or credit of the combination, 
and ere long whatever loss was sustained in de- 
stroying competition is made good, many times, 
from abundant revenues realized from full prices. 

There can be no fair comparison in the matter 
of competition between individual firms and 
corporations of limited capital, and combinations 
with unlimited, or enormous, capital and few 



Trusts versus The Public Welfare. 145 

competitors. The combination can destroy a 
competitor by sustaining a loss that will not in 
any degree affect its business standing, but the 
individual firm or corporation is apt to impair its 
capital and credit in a war of prices it might 
engage in to secure an undue proportion of 
business and, therefore, rarely undertakes to 
enlarge its business by that means. When in- 
dividual firms and corporations predominated 
there was no protracted or injurious war of prices 
at any time between them ; the field of trade was 
left open for the many to enter and obtain a 
fair share of business at a fair and reasonable 
profit. Inordinate profits could not be gotten. 

MR. HAVEMEYER AND THE TARIFF. 

Mr. Havemeyer has about as peculiar views 
of the tariff question as he has of labor and of 
the right of our citizens to engage in business 
and conduct it without being oppressed or de- 
stroyed by a powerful competitor. He is very 
outspoken in denunciation of the protective 
tariff, and in the next breath asks for an increase 
of duty on refined sugar to protect (?) the Ameri- 
can Sugar Refining Company. When before 
the Industrial Commission and denouncing duties 

laid upon foreign manufactures and natural pro- 

10 



146 Trusts versus The Public Welfare. 

ductions imported into this country the question 
was put to him: "If you were left perfectly 
free would you be willing to face the situation 
if you were guaranteed the duty would be taken 
off?" He quickly answered, " Why, we should 
be ruined, absolutely." 

The sugar refining industry in the United 
States is protected by a duty of one eighth of a 
cent a pound, or 12^ cents a hundred pounds on 
refined sugar, an amount scarcely noticed by the 
consumer in the purchase of sugar required by 
his family during the year. As to whether or 
not the duty is necessary to sustain our domestic 
refiners against the competition of foreign re- 
finers remarkably few people in the United 
States know. Considering the duty on raw 
sugar, which does not in any manner benefit re- 
finers, consumers, in the large cities in particular, 
buy sugar at a low price. The low price is due 
to the contest that has been waged in late years 
by the American Sugar Refining Company against 
independent refiners, especially against Arbuckle 
and Brothers, who only ask that they may have 
a chance to do business, that they may have a 
fair and open field in which to offer and sell 
their sugar at a reasonable margin of profit. 
But the big company says no, you must get out, 



Trusts versus The Public Welfare. 147 

the market of the United States is ours, we must 
and will hold it a monopoly at any cost against 
all " interlopers." To drive the independent 
refiners out of the market prices are cut to a 
basis of little or no profit in the territory in 
which they operate and to all their customers 
wherever located. This seldom failed to force 
the retirement of independent refiners and the 
sale of their plants to the American Sugar Re- 
fining Company who closed or dismantled them. 
While the American cuts prices to cost or near 
cost in certain territory and to certain customers 
in order to destroy competition, it maintains 
profitable prices everywhere else, and has uni- 
formly paid seven per cent, dividend on its pre- 
ferred stock, and big dividends on its common 
stock. Taking into consideration the fact that 
these dividends were earned under the condition 
I have pointed out, one must be impressed that 
the business does not require the aid of national 
legislation to protect it in any way. 

MR. HAVEMEYER AND PRICES ON SUGAR. 

Mr. Havemeyer is not, at any time, influenced 
by sentimental considerations in establishing a 
price for his sugar. If conditions were not as 
they are, that is if competition was entirely 



148 Trusts versus The Public Welfare. 

eliminated, he would double the price without 
compunction as his statements to the Industrial 
Commission prove. When asked by a member 
of the Commission, " Now suppose in the natural 
course of events the American Sugar Refining 
Company should suppress all competition, all 
opposition, I understand from your theory that 
you would then seek to get out of the public and 
consumer the largest amount of profit consistent 
with your idea of business principles ? " His 
answer was, " Precisely." 

Mr. Havemeyer does not want national or 
State interference in the conduct of the business 
of his company ; he holds that it is not responsi- 
ble to the nation or state and should be permitted 
without restraint to do whatsoever its managers 
conceive would promote its interests. He said to 
the Commission : " It is my opinion that corpora- 
tions are under no obligation to the States for 
their existence/' having apparently forgotten 
that they have their being only by authority of 
the State through the charter it grants. When 
asked by the Commission, " Do you believe that 
these trusts should be put more specifically under 
government control than they are, that they 
should have examination or inspection similar to 
the national banks ? " arrogantly replied : " Not 



Trusts versus The Public Welfare. 149 

at all. I think the government should have 
nothing to do with them in any way, shape or 
manner." Answering another question he said : 
" I have a perfect right to manufacture, to sell, 
and to conduct a business which represents a 
particular article, or any article, in the United 
States. I say hands off to the Federal and State 
Governments just the moment they interfere with 
the control in any way, shape or manner." 

How does the reader regard the opinion ex- 
pressed by this great (?) man, this multi-million- 
aire, this sugar king, upon these questions who 
sets himself up superior to national or State con- 
trol, who asserts his positive right to manufacture 
and sell any article in the United States accord- 
ing to his royal will and pleasure, and denies the 
right of national and State governments to im- 
pose any restriction whatever upon the conduct 
of his business. He evidently holds that he is 
vested with the absolute right to resort to any 
means that he may deem necessary to destroy all 
refiners who have the temerity to manufacture 
sugar and offer it for sale in competition with his 
company, to impose many tens of millions of 
dollars of stock that has not a dollar of tangible 
assets to support it upon credulous investors, and 
to extort inordinate profits from the people to 



1 50 Trusts versus The Public Welfare. 

pay dividends on that stock and to swell the vast 
wealth he and his company have already amassed. 
Don't you think this a favorable time to call a 
halt on these men whose greatness (?) comes from 
the dollars they have wrested from the people ? 
Should not the great body of the people, the 
hope and stay of the Republic, be protected from 
being despoiled by them ? Are we to tamely 
submit to this tyranny and after a while discover 
that our passiveness encourages them to go to the 
very extreme in their exactions and ultimately 
find our wage-earners reduced to a condition 
but little removed from peonage, that these men 
may add other tens of millions of dollars to their 
already superabundant wealth ? 

DIVIDENDS OF THE AMERICAN SUGAR REFINING 
COMPANY. 

In 1892 the American Sugar Refining Com- 
pany paid 10^ per cent, dividend on its common 
stock and 7 per cent, on its preferred. Dividends 
paid in 1893 amounted to 21^ per cent, on its 
common and 7 per cent, on its preferred stock. 
Since 1893 to 1901 inclusive, the company reg- 
ularly paid annual dividends of 12 per cent, on 
common and 7 per cent, on its preferred stock. 
The public has no means of ascertaining the 



Trusts versus The Public Welfare. 151 

amount retained in the treasury o£ the company 
every year out of the net earnings but there is 
no doubt about its being immense. The manage- 
ment does not care to acquaint the people with 
the total earnings of the company to invite in- 
vidious comment. Bear in mind the fact that 
the enormous net earnings of this company were 
acquired upon $90,000,000 of capital stock fully 
one half of which had not a dollar of tangible 
assets back of it, therefore dividends would have 
been double the amount paid if they had been 
based on an honest capitalization. 

CHARACTER OF LABOR EMPLOYED BY THE AMERI- 
CAN SUGAR REFINING COMPANY. 

Mr. Havemeyer was asked to tell the Commis- 
sion the sort of labor employed in the refineries 
of the American Sugar Refining Company, his 
reply was : " Almost exclusively unskilled, the 
lowest kind of labor getting from $1.35 to $1.50 
a day. Poles, Bohemians, the lowest class of 
labor in the country." 

Question by a member of the commission : 
" Then you employ what you consider the lowest 
class of labor, and even when you are making 
very large sums of money your wages are not 
high, are they, compared with others?" Mr, 



152 Trusts versus The Public Welfare. 

Havemeyer's answer was : " When we find a 
man that is qualified physically to stand the heat 
and do the business we give him ten per cent, 
more than he can get anywhere else, and we keep 
him." 

Question: "Do you find the class of men 
you name, Poles and Bohemians, better adapted 
to your work than other classes of labor ? " The 
reply was : " No, they are willing to work for less. 
You cannot get an Irishman now, they can 
generally get more money, they do not apply 
any more. The Irishman gets more, all other 
classes get more." 

You will note that in one part of his testimony 
Mr. Havemeyer says he employs a man for work 
in the refineries of his company at $1.35 to $1.50 
a day if his physical condition admits of his 
working in the high temperature maintained in 
them, and that the wages he pays are ten per cent, 
higher than a strong healthy man can get else- 
where, then contradicts that statement by saying 
" they are willing to work for less " than any 
other class. Eef erring to the enormous dividends 
continuously paid for a long term of years, and 
that have been paid regularly since by the 
American Sugar Refining Company, it is hardly 
necessary to comment on the beggarly wages it 



Trusts versus The Public Welfare. 153 

pays to men who work in a temperature never 
less than 90 degrees and running up to 110 de- 
grees, and to Mr. Havemeyer's assertion that the 
wages paid by his company are ten per cent, higher 
than other employers pay. 

Stultifying himself still further in the matter 
of wages this shrewd (?) sugar magnate said : 
" I do not think you can get a laborer for $1.50 
a day in New York ; 24 days in a month — that 
is $36 a month. You have to pay grooms in 
the stable $50." 

The regard had for the working man in the 
employ of the American Sugar Refining Company 
is in supplying him with 15 cents worth of beer 
daily, which sum is deducted from his wages, to 
keep him in good physical condition and fit to 
perform his duties. If he falls below a standard 
of work he loses his job. Mr. Havemeyer re- 
marked, " We can weed out the bad ones." 

Another question put to this gentleman was : 
" Then it is not because they (the Poles and 
Bohemians) are better adapted for the refining of 
sugar that you employ them. You employ them 
because they are the cheapest ? " His reply was : 
" Yes, because they are the cheapest." 

And this man was clamorous for protection on 
refined sugar because the cost of refining in the 



154 Trusts versus The Public Welfare. 

United States on account o£ higher wages paid the 
men in our refineries is greater than in Europe, 
and this difference of cost he stated in his testi- 
mony was one sixteenth of a cent a pound (one 
half the duty we impose) in favor of the European 
refiner. 

MR. HAVEMEYER'S OPINION OF ORGANIZED LABOR. 

Upon the subject of labor in general Mr. 
Havemeyer said to the Industrial Commission: 
" I do not think trade-unions are an advantage to 
the working class. When a man's necessities are 
so great that he is willing to work for $1.50 a 
day he cannot do it because the trade-union tells 
him not to work for less than $2.00." 

Doubtless this multi-millionaire stood ready at 
all times to take advantage of the capable work- 
ing man whose necessities compelled him to ap- 
ply for work at the refineries of the American 
Sugar Refining Company ; the distress of a fellow- 
man could be made available, as one of his busi- 
ness propositions, to add more dollars to his mil- 
lions and to swell dividends to be paid to stock- 
holders. The only employes of the big sugar 
company who belonged to a trade-union are the 
few skilled mechanics in its service, the great 



Trusts versus The Public Welfare. 155 

body of its working force do not belong to any 
labor organization, nor are they encouraged by 
the company to join one. 

Further along in his testimony, after expressing 
regret that he had said anything at all on the 
labor question, and expressing the hope that it 
would be expunged from the records, he very 
frankly said : " Labor to protect itself has got 
to unite, to form trade-unions, has got to con- 
solidate, or I believe that these corporations would 
run them out of existence. There is no doubt 
about it." 

This last expression of Mr. Havemeyer's offers 
abundant food for thought to every working 
man in America. Coming from the source it did 
it should make a more profound impression than 
if it had been uttered by any other man con- 
nected with any combination in the country, it 
simply means that there would be no limit to the 
exactions and oppression of these powerful com- 
binations unless restrained in some way, or by 
some means. 

Working men should stand by their unions and 
perfect them, at the same time the trade-union 
should be intelligently and fairly administered to 
gain the sympathy and support of the public. 
Have they been intelligently administered during 



156 Trusts versus The Public Welfare. 

the past twelve months in particular ? Men be- 
longing to labor organizations must keep in mind 
the fact that we have a population in this country 
numbering eighty millions, a vast majority of 
whom will always be found upholding the just 
claims of working men ; they must also remember 
that they abhor injustice when indulged in by 
organized labor to just as great a degree as if 
it was practised by the employer. Has not far 
more been accomplished to benefit working men 
by compromise and by arbitration than has been 
gained by the many strikes that have occurred ? 
The fact that labor was organized operated to 
bring about the compromises and settlements, 
hence the value of union. Would working men 
have gotten more by engaging in a strike ? I 
doubt it, but there would have been a long period 
of idleness and loss of wages working people 
can illy afford to bear, the spending of years of 
savings to maintain the family, or the creation of 
debt that will be difficult to pay, and in too many 
instances distress and want to encounter in the 
home. And after this long period of idleness 
and loss no better terms, if as good, are accorded 
than could have been effected by compromise in 
the beginning of the trouble between the employe 
and employer. It appears we have reached a 



' Trusts versus The Public Welfare. 157 

time when the members of labor unions regard 
their employers as their enemy ; is this right ? 
Is it to their interest to have such feeling exist ? 
I maintain it is not, and the working men will be 
the sufferers in the end from such a state of feel- 
ing. The employer has rights that organized 
labor must respect if it expects to have and hold 
the good-will of the people ; let each accord 
justice to the other and there will be slight oc- 
casion to strike. Avoid strikes when a fair com- 
promise is proposed and a greater degree of pros- 
perity and happiness will attend working men. 
Mr. Havemeyer was asked by Mr. Jenks of the 
commission, " How many hours a day do your 
employes work regularly?" The response was, 
" In summer they work in shifts of eight hours, 
and in winter they work in shifts of twelve hours 
with two hours for their meals ; in other words 
in summer they work eight hours a day, and in 
winter they work ten." 

These are the working-hours for men employed 
at $1.35 to $1.50 per day in temperatures rang- 
ing from 90 to 110 degrees without variation, 
who according to the testimony of their employer 
are employed " because they are the cheapest." 
The Irishman gets more, all other classes get 
more* 



158 Trusts versus The Public Welfare. 

GLUCOSE SUGAR REFINING COMPANY. 

The Glucose Sugar Refining Company was 
organized in August, 1897, and merged the prin- 
cipal glucose manufacturing plants of the country. 
The products and numerous bi-products of this 
company are mainly used as adulterants, corn 
flour to adulterate and cheapen wheat flour, 
corn oil for mixing with linseed oil, olive oil, 
cod-liver and other oils, and glucose sugar for 
confections and as a substitute for yeast in the 
manufacture of beer. 

There are many other products of this manu- 
facture used for stock food and sundry other 
purposes. 

The value of properties merged was about 
$6,000,000. The combination was immediately 
capitalized at $40,000,000, and issued $24,027,- 
200 of common and $13,638,300 of 7 per cent, 
preferred stock upon which there has been reg- 
ularly paid dividends of 7 per cent, on the pre- 
ferred and 6 per cent, on the common stock. 
The output of the company was stated to be 75 
to 90 per cent, of the product of the country, and 
its value $25,000,000. 

Allowing $6,000,000, for working capital, 
a sum equal to the actual value of the several 
plants when they were acquired by the company, 



Trusts versus The Public Welfare. 159 

and the same amount as correctly representing 
the value o£ the properties, there remains $28,- 
000,000 of stock without a dollar of money or 
property to sustain it upon which the people are 
required to pay dividends. To illustrate how 
dividends are exacted from consumers it is in evi- 
dence that in the one item of crude corn oil that 
was selling at $2.25 per 100 pounds at the time 
of the formation of the company the price was 
steadily advanced until in less than two years it 
was selling at $4.00 per 100 pounds. Similar 
advances were doubtless made in all other products 
of the company to enable it to pay big dividends 
and carry large sums to account of the surplus 
fund. 

THE DISTILLERS AND CATTLE FEEDERS' TRUST. 

The Distillers and Cattle Feeders' Trust was 
organized in 1887, and nine trustees appointed 
to manage its affairs. Each distillery before 
entering the trust was organized into a stock 
company and its stock placed in the hands of the 
trustees who issued trust certificates in exchange 
for it, four shares of trust certificates for one 
share of stock. In other words four dollars of 
trust certificates for one dollar of stock of the 
individual company. 



160 Trusts versus The Public Welfare. 

Eighty-one distilleries went into the trust 
organization, only ten or twelve of them were 
operated, the others were shut down. Each 
distillery (except the small ones) had a manager 
(the owner) under a five-years contract with the 
trust at a salary of $300, a month which was 
paid to him whether the distillery was operated 
or not, and dividends were paid to each distillery 
company whether the distillery was shut down or 
kept in operation. Six per cent, dividends were 
regularly paid during the life of the trust on a 
capital stock of four times the value of its assets, 
and that after the payment of the extraordinary 
expenses indicated. 

As soon as the trust began business prices 
were advanced five cents a gallon, and were ad- 
vanced as high as 20 cents per gallon before it 
was dissolved. 

The production of the trust was about 95 per 
cent, of the output of the country. The court 
declaring trusts illegal combinations this one was 
abandoned. An organization was perfected 
April 1, 1890, under charter granted by the State 
of Illinois, under the name of the 

DISTILLING AND CATTLE FEEDING COMPANY. 

The Distilling and Cattle Feeding Company 
was composed of the same companies that were 



Trusts versus The Public Welfare. 161 

in the trust and under the same management, 
the former trustees now becoming directors, and 
the same distilleries under the same managers 
at the same salaries. The capital stock was in- 
creased to $35,000,000. In 1892 six large dis- 
tilleries were purchased for cash, four of them in 
Illinois, one in St. Louis and one in Nebraska. 
This company absorbed the stock of its subsidiary 
companies on the same terms they entered the 
trust, that is $4.00 of stock of the new company 
for one dollar of stock of the individual companies. 
The management of this company was bad and 
much scandal attached to it, a receiver was ap- 
pointed by the court and wound up its affairs in 
December, 1895, when a new company was organ- 
ized under the name of the 

AMERICAN SPIRITS MANUFACTURING COMPANY. 

The American Spirits Manufacturing Company 
purchased of the receiver of the Distilling and 
Cattle Feeding Company seventeen of the largest 
and best plants owned by that company. The 
cash value of these distilleries and all other 
property of the American Spirits Manufacturing 
Company did not exceed $10,500,000, while 
the capital stock of the company was fixed at 

$35,000,000, divided into $7,000,000 of 5 per 

11 



1 62 Trusts versus The Public Welfare. 

cent, non-cumulative preferred and $28,000,- 
000, common stock, or $3.50 of stock to $1.00 
of tangible assets. This company did not con- 
trol to exceed 60 per cent, of the output of 
spirits and was not in a position to positively 
uphold prices at any time prior to 1898 when the 
Standard Distilling and Distributing Company 
was organized by the people in management and 
control of the American Spirits Manufacturing 
Company, competing distilleries were bought and 
competition ceased, the two companies working in 
harmony together. In order to get control of the 
competing distilleries the Standard Distilling and 
Distributing Company had each of them appraised 
at about what it would cost to build it, and that 
amount was paid in cash for it ; besides the cash the 
seller also received the same amount in preferred 
and a like amount in common stock as a bonus to 
induce him to part with his property, or payment 
of $3.00 in cash and stock for $1.00 of property. 
The value of the property owned by the Stand- 
ard Distilling and Distributing Company was 
$4,000,000. The company was capitalized at 
$24,000,000, and stock to that amount was issued, 
$8,000,000 preferred and $16,000,000 common 
stock. New York capitalists who advanced the 
money to promote this company received $100,- 



Trusts versus The Public Welfare. 163 

000, of its preferred and $150,000, of its com- 
mon stock for each $100,000 cash they advanced 
to pay for the distilleries the company bought. 

THE KENTUCKY DISTILLERS AND WAREHOUSE 
COMPANY. 

The Kentucky Distillers and Warehouse Com- 
pany was organized in February, 1899, with 53 
distilleries manufacturing exclusively Bourbon 
and Rye whiskey in the combination. The com- 
pany also controls four Rye whiskey distilleries 
in the east and one Rye distillery in St. Paul, 
Minn. The capital stock issued by the company 
was $10,500,000 of 7 per cent, cumulative pre- 
ferred and $18,500,000 common stock to pay 
for property purchased, promoters' fees, and 
$1,500,000 working capital. 

Besides the distilling property about 90 per 
cent, of the standard whiskey brands of the country 
came into possession of the company which were 
regarded of greater value than the plants that 
were acquired. 

THE DISTILLING COMPANY OF AMERICA. 

The Distilling Company of America is strictly 
a stockholding company incorporated under the 
laws of the State of New Jersey in the summer 



164 Trusts versus The Public Welfare. 

of 1899 at the instance of the stockholders of 
the American Spirits Manufacturing Company, 
the Kentucky Distillers and Warehouse Company, 
the Standard Distilling and Distributing Com- 
pany and the Spirits Distilling Company which 
was organized in 1896 for the purpose of selling 
the product of distilleries. The stockholders 
of said companies believed their interests would 
be advanced if the affairs of the companies were 
brought under one general management, and 
to that end the stockholding company was cre- 
ated. The capital stock of the Distilling Com- 
pany of America was established at $125,000,- 
000, divided into $55,000,000 preferred and 
$70,000,000 common stock. At once $31,250,- 
000 preferred and $46, 250,000 common stock was 
issued and turned over to the organizers of 
the company to purchase the stock of the four 
companies mentioned of which 96 per cent, was 
promptly secured. After the exchange of stock 
of the Distilling Company of America for the 
stock of the four producing companies the 
organizers had on hand $11,531,600 of pre- 
ferred and $12,558,000 common stock, part of 
which was used in the purchase of distilling prop- 
erties in Philadelphia, Baltimore and St. Paul, 
for which $2,000,000 were paid, and for a work- 



Trusts versus The Public Welfare. 165 

ing capital of $1,500,000, and in payment of a 
big bonus to parties advancing cash for the pur- 
chase of these properties and for the working 
capital. The remainder of that issue of stock 
became the property of the promoters as their 
profit. 

REMARKS ON THE SPIRITS AND WHISKEY TRUST 
AND COMBINATIONS. 

The purpose of this review of the spirits and 
whiskey trust and combinations is to show the 
intent of their organizers and all others directly 
interested in them to stifle competition by the 
power of aggregated capital with a view to ex- 
tortionate profits to pay dividends on an enor- 
mously inflated capital stock. We noted the 
trust of 1887, capitalized at $4.00 fictitious to 
$1.00 of actual value, paying regularly dividends 
of 6 per cent, on its capital stock during the 
period of its existence ; how much was charged 
off for depreciation and the amount placed to the 
credit of the surplus fund was not made public. 
The company succeeding the trust was corruptly 
managed and failed to pay dividends ; its business 
was wound up by a receiver. The next company 
organized was enormously overcapitalized and 
paid dividends regularly on its capital stock. The 



i66 Trusts versus The Public Welfare. 

last and greatest of all, this stockholding company, 
created and maintained to make certain full and 
stable prices, the holding of competition in check 
and the payment of liberal dividends, is also 
immensely overcapitalized. The affairs of the 
company are progressing satisfactorily and divi- 
dends will be earned and paid on the entire capital 
stock at the cost of the " dear people." 

The prodigality of the organizers of combina- 
tions in payment of stocks for properties and for 
the stocks for underlying companies, to promoters, 
and to persons who advanced money to enable 
them to acquire desired property and for other 
purposes is to be especially remarked. Consumers 
have all that to pay through the medium of ex- 
cessive prices. 

THE ROYAL BAKING POWDER COMPANY. 

The Royal Baking Powder Company stands 
without a peer among the combinations in high 
percentage of capital stock in excess of tangible 
assets. It was organized March 3, 1899, and 
capitalized at $20,000,000, consisting of $10,- 
000,000 of 6 per cent, preferred and $10,000- 
000 common stock. Five companies, including 
the original Royal Baking Powder Company, 
were merged into the corporation now bearing 



Trusts versus The Public Welfare. 167 

that name, whose total capital stock before the 
merging occurred, was $940,000 or less than one 
twentieth of the capital stock of the new com- 
pany. The common stock, which carries the 
voting power and consequent control of the com- 
pany and its business, was largely retained by 
persons connected with and interested in the sub- 
sidiary companies, but the greater part of it is 
possessed by one member of the original Royal 
Baking Powder Company. The preferred stock 
is on the market for sale. The capital stock of 
this company is not based upon property values 
but upon the earning power of the combined 
companies. The people seem satisfied to pay 
two prices for the products of this company, that 
is, they pay double the price the article is worth, 
and a confiding public buys its stock. 

THE AMERICAN CHICLE COMPANY (THE CHEWING 
GUM TRUST). 

The American Chicle Company is another ex- 
ample of fabulous overcapitalization. It was 
organized April 8, 1901, with capital stock of 
$9,000,000, of which $3,000,000 is 6 per cent, 
preferred and $6,000,000 common stock. The 
corporation is composed of six companies, five of 
them in the United States and one in Canada. 



1 68 Trusts versus The Public Welfare. 

The aggregate capital stock of these companies 
before consolidating was a trifle in excess of 
$900,000, or less than one eleventh of the capi- 
tal stock of the combination. Trade-marks are 
considered the most valuable assets the company 
has, the earning capacity depending principally 
upon them. Trust magnates find it very con- 
venient to issue an immense amount of watered 
stock on fictitious values placed on trade-marks. 
A practical man cannot understand how great 
value attaches to them when they are controlled 
by a combination producing 90 per cent, or more 
of the chewing gum consumed in America ; 
people buying it have to go to the American Chicle 
Company for their supplies, and would purchase 
freely of new brands if the old ones were entirely 
discarded. The earnings of the company have 
warranted the payment of good dividends, and 
both common and preferred stock sell at high 
prices. As chewing gum is a luxury to its users 
they do not inquire, nor are they concerned 
about, the amount of profit made on it, and their 
paying dividends on $8.00 of fictitious value 
instead of less than $1.00 of stock of real value, 
does not appear to trouble them, but if they 
should suddenly break off from the chewing gum 
habit it would be calamitous to stockholders, as 



Trusts versus The Public Welfare. 169 

the more than $8.00 of water in the $9.00 of 
stock of the American Chicle Company would as 
suddenly evaporate. In other words, stocks 
based on fictitious values placed on trade-marks 
and good-will are not a safe investment and 
should be avoided. 

THE INTERNATIONAL PAPER COMPANY. 

The International Paper Company was organ- 
ized in 1898, with capital stock of $45,000,000, 
of which $25,000,000 was 6 per cent, preferred, 
and $20,000,000 was common stock. The com- 
pany was also authorized to issue bonds to the 
amount of $10,000,000, to obtain working capi- 
tal. Twenty-four of the principal paper mills of 
the United States whose production was 80 per 
cent, of the paper output of the country, were 
merged into this corporation, after their property 
was extravagantly appraised on the basis of one 
share each of preferred and common stock of the 
International Paper Company of the par value of 
$100 each for $100 of property of the different 
companies. Before the combination the profit 
of one mill whose capital stock was $500,000, 
averaged $133,092 a year during a period of 44 
consecutive months. This mill and properties 
belonging to it (all covered by its capital stock 



170 Trusts versus The Public Welfare. 

of $500,000) was taken into the new company 
at a valuation of $4.50 of International Paper 
Company stock for $1.00 of its stock, or a gross 
valuation of $2,250,000 for the property. 
Another mill company that had averaged an 
annual profit of 32 to 48 per cent, was merged 
on the basis of $4.00 of International Paper 
Company stock for $1.00 of its stock. One 
other case of excessive valuation was that of a 
company whose properties stood upon its books 
at $60,000, which were merged into the Inter- 
national at the stupendous price of $3,500,000. 
This company owned valuable water power which 
was acquired at small cost many years ago that 
was appraised at an extreme price for the com- 
bination, but it could not have been worth the 
vast sum of more than three million dollars 
allowed for it in the merging ageement. 

At the time of the consolidation of these com- 
panies it was admitted that the $20,000,000 of 
common stock was paid to them for good-will, 
trade-marks, etc., for intangible things upon 
which large earnings must be realized in order to 
pay dividends. Immediately after the formation 
of the combination there was a general advance 
in prices. News-print paper, for instance, that 
was selling for $35.00 per ton, was steadily ad- 



Trusts versus The Public Welfare. 171 

vanced until it reached $55.00 per ton in April, 
1900. All other kinds of paper were similarly ad- 
vanced in price. The purpose of the combina- 
tion to compel consumers to pay dividends on a 
large amount of watered stock is thus made 
apparent. 

Mr. Hugh J. Chisholin, president of the Inter- 
national Paper Company, in his testimony before 
the Industrial Commission in 1899, said : " The 
company owns and operates 32 plants of total 
capacity of about 1500 tons of paper daily/' and 
explaining the advantages had by combining 
plants he said : " It was also believed that econo- 
mies could be made in the manufacture and dis- 
tribution of the product which would enable the 
new company to manufacture and distribute their 
product at less cost than it would be possible for 
any single mill to do." 

The company inaugurated its economies ; offi- 
cers, salesmen and bookkeepers of the individual 
companies were done away with, discharged. " All 
of the directing powers have been concentrated in 
one office to conduct the operations of all the mills. 
Each department of the work is conducted by 
one person. All the manufacturing is in charge 
of one man ; all the construction and mainte- 
nance in the hands of another ; all the purchas- 



172 Trusts versus The Public Welfare. 

ing in the hands of a third, etc. We get better 
quality of product and more of it from the same 
machinery and the same number of men than 
was secured by the individual mills. Also the 
gross cost of selling the product is much less 
than the aggregate cost to the separate mills." 

After carefully reading the testimony of the 
president of the paper manufacturing trust, I 
am constrained to say we have no warrant for 
believing the cost of producing the pound, or 
ton, of paper greater in April, 1900, when the 
price of News-print paper was $55.00 per ton 
than it was less than two years and four months 
before, when the individual manufacturers were 
selling it for $35.00 per ton, and the same can 
be said of all other grades and qualities of paper. 
If the testimony of Mr. Chisholm is to be relied 
upon as truth, that " we get a better quality of 
product and more of it from the same machinery 
and the same number of men than was secured by 
the individual mills, also the gross cost of selling 
the product is much less than the aggregate cost 
to the separate mills," the presumption is the 
cost of combination manufacture was less than 
the cost of manufacture by the mills operated 
separately, and it is obvious consumers have paid 
the combination inordinate profits to support the 



Trusts versus The Public Welfare. 173 

many millions of dollars of watered stock it 
issued, to pay big dividends, to pay big salaries 
to principal officers, and to concentrate wealth in 
the hands of a few persons to the injury of the 
people at large. 

Whilst instituting economies in the various 
departments of the mills and business of the com- 
pany, it appears that they were lost sight of when 
" the salary of the president of the company was 
fixed at $50,000 a year, that of the vice-presi- 
dent at $15,000 a year, and paper manufacturers 
who had been receiving salaries of $ 7,500 a 
year as managers of mills were brought to New 
York at salaries of $15,000." 

Mr. William A. Russell, the first president of 
the International Paper Company, when before 
the Ways and Means Committee of Congress 
about a year previous to the formation of that 
company, and when the subject of the possible 
combination of the paper manufacturing con- 
cerns was suggested, said " they would save 
$1,500,000 per annum by reducing their work- 
ing force." 

Would it not be well to pause here and give 
serious thought to the statement of Mr. Russell, 
that if the paper makers would combine " they 
would save $1,500,000 per annum by reducing 



174 Trusts versus The Public Welfare. 

their working force/' and to Mr. Chisholm's testi- 
mony, that " we get a better quality of product 
and more of it from the same machinery and the 
same number of men than was secured by the 
individual mills ? " In the fewest words possible 
these statements mean the reduction of the work- 
ing force to the minimum ; the concentration of 
manufacturing into the least number of plants 
that can be successfully operated ; the task sys- 
tem of work, and every man working under high 
pressure in order to hold his job. 

Is the public welfare promoted by restricting 
employment of our wage earners, by reducing 
capable men who are willing and anxious to work 
to a condition of poverty and want so that a few 
men may fatten on big salaries, and a few others 
secure big dividends on trust stocks that they 
have invested their money in? I hold to the 
contrary. The best interests of our country and 
people are subserved by the greatest possible 
number of wage earners having employment, and 
by that distribution of wealth through the pay- 
ment of liberal American wages that has made 
this country what it is in greatness and power, 
and in the happy condition of its people. 

The welfare of the people is of more conse- 
quence to us than the so-called economies of 



Trusts versus The Public Welfare. 175 

trust manufacture of which we have no visible 
sign. 

In less than two years after urging upon Con- 
gress the necessity of higher duties on wood pulp 
and paper, Mr. Chisholm, in February, 1899, 
boastfully said : " If the paper industry of the 
United States should determine to capture the 
markets of the world, there is no nation that could 
stand against us with our natural resources and 
national traits of character." And in his testimony 
in 1901 he said : " To day we are the foremost 
producer of paper in the world." 

THE AMERICAN CARAMEL COMPANY. 

The American Caramel Company was organ- 
ized in 1899 under charter granted by the State 
of New Jersey, and issued $6,700,000 of pre- 
ferred and $7,500,000 of common stock. Each 
subscriber received the amount of his subscrip- 
tion in preferred stock and an equal amount of 
common stock as a bonus. The tangible assets 
of this company are insignificant, the stock has 
no foundation of cash or property to give it 
value and may be termed worthless as an invest- 
ment. This combination is cited simply as an- 
other example of enormous over-capitalization 



176 Trusts versus The Public Welfare. 

resorted to for the purpose of plundering the 
people. 

THE NATIONAL STARCH COMPANY (THE STARCH 
TRUST). 

The National Starch Company, another New 
Jersey corporation, was organized in April, 1900, 
and capitalized at $13,500,000, divided into 
$4,500,000, 6 per cent, cumulative preferred 
stock, $5,000,000, common stock, and $4,000,- 
000, 5 per cent, gold debenture bonds. The 
value of the assets of the company is represented 
by the preferred stock and the bonds. Nearly 
all, if not the entire amount, of the common 
stock has no cash or property base and therefore 
possesses no actual value. 

THE UNITED STATES LEATHER COMPANY. 

The United States Leather Company was in- 
corporated February 25, 1893, under the laws of 
the State of New Jersey. Its principal business 
was the tanning of sole leather. Twenty-five or 
thirty tanning concerns were merged into this 
company whose property was appraised and taken 
over upon payment of one share of eight per cent, 
preferred and one share of common stock of the 
United States Leather Company, each of the par 



Trusts versus The Public Welfare. 177 

value of $100, for $100 of property of the 
merged companies and partnerships ; $6,000,000, 
of 6 per cent, debenture bonds were issued and 
sold to the public to secure working capital. 
No cash was paid for any of the property, only 
the stock of the new company was used in pay- 
ment, and none of it put upon the market. The 
gentleman from whose testimony this is taken 
said : " In the old days when we worked for our- 
selves, and not for stockholders, demanding 
dividends, we kept doing business and kept our 
tanneries running whether there was any money 
in it or not. But net profits have certainly not 
been greater since the consolidation than they 
were before, and I believe that the economy of 
management has not been less." The inference 
from this testimony is that the boasted superiority 
of combination management had not been made 
manifest in the tanning business, that the tanneries 
were closed part of the time and employes idle, 
while under individual management the business 
had been successful and the hands kept at work 
at full wages- 

THE NATIONAL SALT COMPANY. 

The National Salt Company was organized 

March 18, 1899, under charter obtained from the 
12 



178 Trusts versus The Public Welfare. 

State of New Jersey and acquired at that time 
13 plants located in the State of New York. 
The authorized capital stock of the company was 
$12,000,000, divided into $5,000,000, seven per 
cent, non-cumulative preferred and $7,000,000 
common stock, all of which was issued. $2,400,- 
000 preferred and $3,500,000 common stock was 
used in acquiring the 13 New York plants on the 
basis of one share each of preferred and common 
stock of the National Salt Company, of the par 
value of $100 each, for $100 of property of the 
constituent companies. $1,150,000 working 
capital was secured on the same basis, 2 for 1. 
In 1901 the National Salt Companies purchased 
and constituent companies numbered 36 plants 
located in New York, Ohio, Michigan, Kansas 
and Texas. Some of the later acquired plants 
were paid for in stock of the National Salt Com- 
pany, while cash was paid for others. The com- 
pany produces 13,000,000 barrels of salt an- 
nually. Since its organization the company has 
continuously paid 7 per cent, dividends on its 
preferred stock, and 6 per cent, on its common 
stock after the first year. On January 1, 1901, 
there stood to the credit of the sinking fund the 
sum of $778,949.32. These are most attractive 
dividends on stock containing 100 per cent. 



Trusts versus The Public Welfare. 179 

water, and considering them in connection with 
the surplus in the treasury the net earnings must 
have fulfilled the expectations of the manage- 
ment. 

THE AMERICAN SMELTING AND REFINING COMPANY. 

The American Smelting and Refining Company, 
issued capital stock to the amount of $54,800,- 
000, divided equally into 7 per cent, cumulative 
preferred and common stock. This stock, less a 
part used to procure $6,500,000 for working 
capital, was employed in acquiring the merged 
properties on a basis of one share of preferred 
and seven-tenths of a share of common stock for 
one share of stock of the subsidiary companies. 
The preferred stock represented the value of the 
physical property, while the common stock was 
paid for the intangible asset termed good-will. 

The net earnings of the company for the year 
ending October 31, 1900, the latest noted in the 
testimony before the Industrial Commission, were 
$4,500,000. 

THE INTERNATIONAL SILVER COMPANY. 

The International Silver Company manu- 
factures silver-plated ware, table-ware, tea-sets, 
knives, forks, spoons, etc. The company was 



i8o Trusts versus The Public Welfare. 

organized under the laws of the State of New 
Jersey, November 21, 1898, and issued capital 
stock amounting to $15,007,500 of which $5,111,- 
500 was 7 per cent, cumulative preferred and 
$9,896,000 common stock. Sixteen companies 
were merged into this combination. The plants of 
two companies were shut down. It is in evidence 
that the actual value of the merged properties 
did not exceed 45 or 50 per cent, of the price 
paid for them; the remainder of capital stock 
was allotted to trade-marks, good- will, working 
capital, etc. An example of the extravagant 
price paid for some of the property is remarked 
in the payment of $25 cash, $50 of preferred 
and $25 common stock, for each $25 par value 
share of one of the companies taken in whose 
property was valued at $1,500,000, or four dollars 
in cash and stock for one dollar of stock of the 
constituent company. The following salaries 
were voted by the board of directors March 27, 
1899, to date from January 1, 1899 : President, 
$12,000 a year ; four directors, who were members 
of the executive committee and managers of four 
of the largest plants, $10,000 per year each ; one 
director, who was manager of a factory, $7,000 a 
year ; and the assistant-treasurer $8,000 a year. 
No dividends had been paid up to November 



Trusts versus The Public Welfare. 181 

15, 1899, the date the witness from whose testi- 
mony this is taken appeared before the Com- 
mission. 

On February 24, 1899, the preferred stock of 
the International Silver Company was selling on 
the New York Stock Exchange at 82^ cents and 
its common stock at 33^| or H6 T 5 ^ for the two 
stocks combined. A remarkable price for stock 
when so much of it has only fictitious value, 
especially when no dividends had been paid. 

THE OTIS ELEVATOR COMPANY. 

The Otis Elevator Company was formed in 
November, 1898, and conducts its business under 
charter issued to it by the State of New Jersey. 
Eleven companies doing 80 to 85 per cent, of the 
elevator and hoisting machinery business of the 
country were merged into this corporation. The 
properties of the constituent companies were 
paid for on the basis of one share of preferred 
and one and a half shares of common stock of the 
Otis Elevator Company, each of the par value 
of $100, for $100 of property of the individual 
companies at its appraised value, or $250 of stock 
for $100 of property. 

Prices named by the combination are no higher 
than were charged by Otis Brothers & Co., a 



1 82 Trusts versus The Public Welfare. 

high-priced concern, but are largely advanced 
over prices gotten by the other companies when 
they were operating their plants separately. 
This because the combination issued 150 per cent. 
of watered stock upon which the people must 
pay dividends. 

The public who have elevators and hoisting 
machinery to buy have a goodly price to pay for 
such things since the withdrawal of ten companies 
from competition with each other and with Otis 
Brothers and Company. 

THE AMERICAN COTTON OIL COMPANY. 

The American Cotton Oil Company is a com- 
bination operating under a New Jersey char- 
ter, with capital amounting to $33,435,700, 
consisting of $10,198,600 preferred, $20,237,- 
100 common stock, and $3,000,000 gold deben- 
ture bonds. On August 31, 1900, the assets of 
known value belonging to this company amounted 
to $17, 949,836. The sum of $15,485,837 of the 
stock of the company was assigned to those in- 
tangible things called good-will, trade-marks, 
processes, etc. The net earnings* of the company 
have permitted the payment of interest on the 
bonds and good dividends on both preferred and 
common stock. Witnesses giving in their testi- 



Trusts versus The Public Welfare. 183 

mony did not divulge the amount of earnings 
that were exacted from the people, on account 
of the many millions of dollars of its watered 
stock, that was placed to the credit of the sinking 
or reserve fund, doubtless a large sum annually. 

THE ANTHRACITE COAL COMPANIES. 

While the Anthracite Coal Companies are not 
combined under one charter and operated as one 
corporation, nevertheless the agreements existing 
between the eight great companies controlling 91 
per cent, of the capacity of the anthracite mines 
in the matter of production, wages and prices, 
restriction of competition and the allotment of 
tonnage to each of the coal-carrying railroads, 
constitute about as full-fledged a monopoly, or 
trust, as we have in the United States, and they 
are so considered. For the purpose, therefore, 
of this writing they will be denominated a com- 
bination or trust. 

Such agreements as exist between these coal 
companies are productive of evil, not alone to 
those persons directly concerned as employes 
who are oppressed by them, but to thousands 
of others and to large business interests affected 
by extortionate prices charged for coal when 
production is stopped. This was made plain 



1 84 Trusts versus The Public Welfare. 

upon the occasion of the late strike of anthracite 
miners who rebelled against working for wages 
upon which they could barely subsist, and hoped 
by that means to better their wretched condition. 
During the many months the strike lasted the 
companies positively refused to concede any of 
the demands of the miners, or to submit differences 
between them to arbitration. The result of their 
obduracy was the perpetrating of crime, much 
suffering and want, not only in the mining region 
but in eastern cities, and the loss of hundreds of 
thousands, if not millions, of dollars in extortion- 
ate prices charged for coal. If President Roose- 
velt had not taken the course he did to cause all 
matters at issue between the miners and coal 
companies to be submitted to arbitration, the 
struggle would have been prolonged, distress in- 
tensified, and beyond even the shadow of a doubt 
the strike would have been broken, the miners 
would have been forced to return to work upon 
such terms as it might have suited the companies 
to impose, and, their organization or union de- 
stroyed, to leave them helpless and in a condition 
but little removed from servitude. The presi- 
dents of the coal companies had determined to 
conquer the striking miners and would have kept 
the mines closed a year or more if necessary and 



Trusts versus The Public Welfare. 185 

spent millions of money to do it ; but when the 
President o£ the United States proposed that all 
differences between them and their workingmen 
be submitted to arbitration, not alone in their 
own interest but in the interest of the people as 
well, the operators were constrained to submit ; 
powerful as they are, they did not care to face 
the indignation that would have been aroused 
throughout the country if the proposition of the 
President had been rejected. 

The miners had lost their strike when thev 

%> 

were returned to work almost certain of higher 
wages to be paid them thereafter, and their 
organization was left intact for future usefulness. 
Organized labor owes President Roosevelt a debt 
of gratitude for interfering in the anthracite coal 
strike. The acknowledged loss of a strike of the 
magnitude of the anthracite miners' strike and 
the destruction of their union would have been a 
serious blow to organized labor in general, its 
influence would have been very much diminished 
by it. 

The present constitution of the State of Penn- 
sylvania prohibits a railroad company from minr 
ing and selling coal, but that prohibition is evaded 
by eight railroad companies owning the stock of 
%nd controlling eight separate coal companies 



1 86 Trusts versus The Public Welfare. 

producing 91 per cent, of the output of anthra- 
cite coal, whose presidents are officers of the rail- 
roads. A certain percentage of coal carrying is 
allotted to each road, and freight charges and 
selling price are fixed by agreement. In 1900, a 
strike of the anthracite miners was ended by the 
companies conceding ten per cent, advance in 
wages and correcting several abuses. One of the 
wrongs that was righted was the extirpation of 
the exorbitant charge of $3.75 per keg that was 
charged the miners for blasting powder that cost 
the coal company a maximum price of $1.25 per 
keg. After the strike was ended the companies 
sold the powder to their miners at $1.50 per 
keg. 

The production of anthracite coal in this coun- 
try in 1901 was 60,242,560 tons of 2240 pounds 
each costing from $1.45 to $1.60 per ton to 
mine, or at the mine entrance, according to the 
testimony of Mr. Baer, railroad president and 
president of one of the coal companies when be- 
fore the strike commission in 1903. Anthracite 
coal sold alongside the wharf in New York in 
1899 to wholesale dealers at an average price of 
from $3.00 to $4.24 per ton of 2000 pounds for 
chestnut size and from $3.30 to $4.55 per ton 
of 2000 pounds for stove size, according to qual- 



Trusts versus The Public Welfare. 187 

ity. The prices realized paid a fair profit to the 
coal companies after paying liberal freight charges 
to the railroads. During the period of the late 
strike the coal companies enormously advanced 
the price of anthracite until consumers in New 
York were paying $9.00 to $15.00 per ton of 
2000 pounds for it, and there were instances of 
still higher prices paid for it. 

For years past the independent anthracite 
coal operators have protested against the rates 
the railroads charged for carrying their coal to 
market. In 1899, upon the expiration of con- 
tracts with the railroads and their failure to 
renew them upon more favorable terms, they 
secured the right of way, surveyed a route and 
began the construction of a railroad to the sea- 
board. When matters had progressed thus far 
the coal-carrying roads made a satisfactory agree- 
ment with the independents, who resumed ship- 
ping over them. This agreement was, later on, 
violated by the railroads, and the several inde- 
pendent anthracite interests entered into an ar- 
rangement with the Pennsylvania Coal Company, 
and a new railroad was projected. The arrange- 
ment with this company was favorable to the 
independent operators, as under it they were in 
a position to market their coal at less price to 



1 88 Trusts versus The Public Welfare. 

consumers at a satisfactory price to themselves. 
The coal-carrying railroads obstructed the build- 
ing of the new road but their efforts to prevent 
its construction proving of no avail, " the Penn- 
sylvania Coal Company was purchased by Messrs. 
J. Pierpont Morgan & Co. in January, 1901, at 
an advance of 752 per cent, upon the par value 
of its stock, to deprive independent operators of 
transportation facilities, and immediately turned 
over to the Erie Railway Company/' A most 
effective way to regulate competition, as the in- 
dependent operators were again made dependent 
upon the hostile railroads for transportation of 
their coal to market. 

The total production of bituminous and an- 
thracite coal in the United States in 1901 was 
261,874,000 tons of 2240 pounds each, valued 
at $1.33 per ton at the mine. The output of 
coal of all kinds from the mines of Great Britain 
and Ireland in 1901 amounted to 219,047,000 
tons of 2240 pounds each, valued at $2.24 a ton 
at the mine. The product of the coal mines of 
Germany in 1901 was 108,417,000 tons, much 
inferior in quality to the British coal and costing 
the same, $2.24 per ton at the mine. The great- 
est output of coal from the mines of France was 
32,722,000 tons in 19Q1 5 the cost per ton at the 



Trusts versus The Public Welfare. 189 

mine exceeding the cost of British coal. Austria- 
Hungary has produced as high as 39,000,000 
tons in one year, Belgium 23,462,817 tons, Rus- 
sia 16,151,000 tons. No other country in the 
world mines as much as 7,500,000, and no coun- 
try producing 5,000,000 or more tons annually, 
except British India, mines coal at as low cost as 
the United States. 

France and Germany import quantities of coal. 
The United States exports coal in limited quan- 
tity, while Great Britain is a large exporter of it 
to the continent of Europe, the Orient and to the 
West Indies and South America. 

Under ordinary circumstances British coal, 
both bituminous and anthracite, is barred from 
entry into the United States because of its high 
cost at the mine and freight charges to port of 
shipment and by sea. The only country in a 
position to send us coal is Nova Scotia, and it 
can find a market only in the New England 
States and New York. Considering the situation 
in those states during the past winter when they 
were deprived of their ordinary supplies of coal ; 
when consumers were compelled to pay extor- 
tionate prices for it ; when poor people were 
suffering on account of not being able to buy it 
at the extreme prices then demanded, and when 



190 Trusts versus The Public Welfare. 

manufacturing establishments were forced to shut 
down because of lack of it, it is obvious that it will 
be to our advantage to encourage the mine owners 
of that country to increase shipments of their coal 
to us whenever our operators advance prices 
immoderately; this encouragement is offered by 
the permanent repeal of our duty of 67 cents per 
ton on coal. The small amount of coal that 
will be sent to us under normal conditions will 
have no appreciable effect upon wages paid our 
miners, but with our ports open to its free admis- 
sion there will be some protection against exces- 
sive prices. The production of coal in the British 
possessions in North America in 1901 was less 
than 5,700,000 tons. 

Statements to the effect that deposits of 
anthracite coal in this country have been fully 
developed have no foundation in fact, as is noted 
in the discovery in April last of an immense 
deposit of it in Hanover township south of the 
city of Wilkesbarre, Pennsylvania, on land owned 
by the Delaware, Lackawanna and Western 
Railroad and Lehigh and Wilkesbarre Coal Com- 
pany. It is estimated that this tract of land con- 
tains 300 million tons of anthracite, and it is said 
to be the most valuable discovery of such coal 
that was ever made. There are doubtless rnui- 



Trusts versus The Public Welfare. 191 

tiplied millions of tons of anthracite yet to be un- 
earthed in Pennsylvania and other states, and no 
apprehension need be felt about scarcity of it. 
As net earnings of the coal-carrying roads have 
heretofore been of large amount and satisfactory, 
an advance of price for anthracite beyond addi- 
tional wages paid miners is not warranted. 



GENERAL REMARKS. 

The recital of the merging of our individual 
manufacturing partnerships and corporations into 
great and powerful combinations whose object 
was monopoly of the business they are engaged 
in by means of their power to regulate produc- 
tion, prices and wages and destroy competition, 
and the telling of the evils they have inflicted 
upon us could be continued to the filling of ten 
volumes or more of the size of this one, but 
enough has been written to prove combinations a 
menace to the public welfare and, therefore, I do 
not deem it necessary to make further separate 
mention of them. 

Upon every hand we face mighty combinations 
that our independent manufacturers are powerless 
to contend with. Save only in the production of 



192 Trusts versus The Public Welfare. 

cotton goods, every important line of manufacture 
that it is practicable to combine is combined, each 
under one general management, to prey upon the 
people by compelling payment of inordinate 
prices for trust productions to the end of enrich- 
ing a few persons through whose manipulations 
this condition was brought about. The tyranny 
of aggregated capital that forbids anyone enter- 
ing the industrial field in opposition to combina- 
tions must be brought to an end. The indivi- 
dual citizen must have a chance, as he formerly 
had, to use his knowledge, experience and limited 
means for his advancement ; unless he is protected 
in his right to manufacture and to sell his wares, 
what interest can he have in good government, 
and what interest can idle workingmen who have 
slight prospect of getting work to do when trusts 
limit employment have in the government of the 
country when their interests are disregarded by 
the law-making power. Anarchists are a product 
of tyranny. 

At the end of seventy-one years of national 
existence the value of the product of our manu- 
facturing industry in 1860 was $1,185,866,676. 
Four years of destructive war followed during 
which there was no noticeable increase of manu- 
facture, but under broad and liberal national 



Trusts versus The Public Welfare. 193 

policies the industry developed year after year 
until a product of $3,385,860,334 was attained 
in 1870, an increase of more than 150 per cent, 
over 1860. There were 2,054,000 persons em- 
ployed in the industry that year, to whom $620,- 
467,474 were paid in wages. 

From 1870 to 1900 the greatest activity pre- 
vailed in diversifying and enlarging our manu- 
facturing industry ; its development in the short 
space of thirty years has no parallel in the his- 
tory of nations. At the end of twenty years the 
value of our manufactures, for the year 1890, 
reached the stupendous sum of $9,370,107,624, 
which was increased ten years later to $13,039,- 
279,566, for the year 1900. 

These are marvelous results of individual 
energy and enterprise, of superb management. 
In 1890 employment was had in our manufac- 
turing industry for 4,251,613 persons, who were 
paid wages amounting to $1,891,228,321. Ten 
years later, in 1900, our manufacturers paid 
$2,328,691,254 in wages to 5,316,802 employes 
and working people. 

Our great manufacturing industry was built 
up to a product of more than thirteen billions 
of dollars, employing millions of people and dis- 
bursing billions of money in wages, by individual 

10 



194 Trusts versus The Public Welfare. 

firms and companies composed of enterprising 
forceful men who had hazarded their all of 
money, talent and energy in establishing and 
conducting the different lines of manufacture 
they were engaged in. After years of effort, 
perplexity and care, and too frequently large loss 
of capital, they succeeded in planting their busi- 
ness on a good dividend-paying basis, and ex- 
pected to pass the few years they would remain 
in it free from anxiety and care, and finally turn 
it over to the control and management of their 
sons or sell it at its value, as it would not be 
difficult to find a purchaser for a successful 
manufactory. 

This was the condition of our manufacturing 
industry before the combination craze seized 
upon our capitalists. While there were a few 
industrial combinations formed in an earlier 
period, the start in the formation of those that 
now burden the land was made in 1899, but they 
had no influence one way or the other upon 
production that year as it was too far advanced 
to allow of changes being made to affect the out- 
put. The figures given as the value of the pro- 
duct of our manufacturing industry for 1900 are 
from the census report and apply to 1899, which 
was the census year. 



Trusts versus The Public Welfare. 195 

To show what was done by our individual man- 
ufacturing firms and corporations in certain lines 
of manufacture I cite the total production of 
821,223 tons of pig iron in the United States in 
1860 against an output of 1,165,175 tons in 
1870, increased to 3,835,191 in 1880, to 9,202,- 
703 in 1890, and to 13,789,242 tons in 1900. A 
product of 11,838 tons of steel of all kinds in 1860 
which was increased to 68,750 tons in 1870, and 
10,187,322 tons in 1900. An output of 1000 
kegs of wire nails in 1875 against 7,232,979 
kegs produced in 1900, and 34,152 tons of steel 
rails turned out by our rolling mills in 1870 
against an output of 2,383,654 tons in 1900. 

The advance in textile manufacture was also 
wonderful under our individual firms and corpo- 
rations. The value of cotton goods produced by 
our mills in 1860 was $115,681,774; their pro- 
duct was increased to $177,489,739 in 1870, to 
$210,950,383 in 1880, to $267,981,724 in 1890, 
and to $339,200,320 in 1900. The value of the 
product of our woolen mills was increased from 
$80,734,606 in 1860 to $267,252,913 in 1880, 
and to $337,768,524 in 1890, a marvelous in- 
crease of production during that period, and for 
the year ending it. The advancement made in 
the manufacture of silk goods was as astonishing 



196 Trusts versus The Public Welfare, 

as our progress in the production of woolen 
goods. This is noted in the increase in value of 
the product of our silk mills from $6,607,771 in 
1860 to $12,210,662 in 1870, to $41,003,045 in 
1880, to $87,298,454 in 1890, and to $107,256,- 
258 in 1900, elevating the United States as early 
as 1890 to second place in silk manufacture 
among manufacturing nations, France standing 
first. The list could be extended to cover every 
branch of manufacture in the country, the growth 
of all was correspondingly great under the 
management and control of individual firms and 
companies. There is nothing whatever to in- 
dicate the slightest advancement under and due 
to combination management. 

The great industrial combinations now giving 
us so much concern came into being in the most 
prosperous period ever known in America when 
the demand for manufactures was almost limit- 
less. Under conditions that then existed and 
that have been most favorable to the present 
time, if the country had been dependent upon 
individual firms and corporations for manufac- 
tures new mills and factories of all kinds would 
have been built and operated to turn out a pro- 
duct equal to the fullest demands of buyers ; 
largely more persons would have had employ- 



Trusts versus The Public Welfare. 197 

ment at as high wages as combinations pay, 
very likely higher wages than they pay, as scar- 
city of labor favorably affects its price, more 
money would have entered into circulation, as the 
purchasing power of wage earners would have 
been increased to the extent of the earnings of 
the additional hands employed, and our exports 
of manufactured goods would have been much 
larger in volume and value as effort would have 
been made to sell more of them to foreign coun- 
tries than were exported by combinations. Com- 
petition always stimulates business, ichether 
domestic or foreign. We would unquestionably 
have reached a higher state of prosperity if our 
manufacturing had been done by independent 
companies and firms than has yet been attained 
under combination control of our manufacturing 
business or that will be achieved while they have 
the power to regulate production and limit the 
number of wage earners employed. 

Senators and representatives in Congress who 
have stood in opposition to laws that would re- 
strict the power of combinations and bring them 
under national control and supervision, and others 
loath to vote such laws who have little knowl- 
edge of manufacturing affairs, but are prolific of 
theories, who assert that industrial combinations 



198 Trusts versus The Public Welfare. 

are necessary because o£ changed conditions 
would find it extremely difficult to point out 
changes that have occurred to cause them to 
become more potent than our individual firms 
and companies in maintaining our supremacy as 
a manufacturing country, and would find it 
equally difficult to indicate even one benefit our 
people have received at their hands. These 
theorists insist that manufactures can be produced 
at less cost by the combinations and sold at less 
price by them than can possibly be effected by 
individual manufacturers. I challenge the gentle- 
men to mention one article produced by a com- 
bination that is now sold, or has been sold at less price 
than our individual manufacturing concerns sold it 
for before combinations were formed. I challenge 
them to demonstrate in any practical way that 
the aggregate sales of manufactures are as great 
under combination management, controlling near 
all the output of our manufactories, and on 
account of that expecting to effect sales without 
much effort on their part, as they would have 
been if the factories had been operated separately 
and the management of each of them earnestly 
and energetically competing for business and 
urging sale of their goods. There is one thing 
very certain, and that is if combinations manu- 



Trusts versus The Public Welfare. 199 

facture at less cost than their constituent com- 
panies did when they were operated separately 
consumers have not been advantaged by it ; the 
extra profit thus realized has gone into the 
pockets of high salaried officers and stockholders 
and into the treasury of the combination ; not 
one cent of it has gone to the people in the way 
of lower prices for combination wares. 

Individual manufacturing firms and corpo- 
rations exhibited far more enterprise in their day 
in urging sale of the product of their establish- 
ments and extending their business both at home 
and abroad than combinations have since they 
came into being, as is well known to all persons 
engaged in business pursuits. With all, or a 
large part of the capital of the individual manu- 
facturer invested in his business, he was not dis- 
posed to have it lag to compel him to restrict pro- 
duction or shut down the plant ; he was at all 
times actively in the market seeking customers 
for his goods, and usually found them. If busi- 
ness was dull his traveling salesmen were more 
urgent than at other times in their effort to make 
sales, they left no field uncovered, and if under 
the condition of stagnated business the product 
of the factory was not sold he looked forward 
hopefully to a favorable change and continued 



200 Trusts versus The Public Welfare. 

work in the factory and kept his hands employed 
until an excessive accumulation of goods com- 
pelled a shut down. During the period of 
enforced idleness strenuous efforts were made 
to reduce stock, and when that was accomplished 
the old employes were then brought back to their 
places in the factory and work resumed. Not so 
with combinations : when business becomes slack 
with them, manufactories are shut down and hands 
discharged, and work is confined to only those 
plants necessary to produce the quantity of goods 
actually demanded by the trade. No accumu- 
lation of stock is permitted in their business; 
no sentimental regard for the welfare of their 
working people ever influenced them to resume 
work in a factory until they had knowledge of a 
certain outlet for its product. 

Under combination control and management 
the building of manufactories almost ceased, 
many plants they absorbed were shut down and 
a number of them dismantled and destroyed, 
manufacturing was concentrated at selected places 
and business restricted to the home markets where 
big profits could be realized. Our individual 
manufacturing firms and corporations from year 
to year had the land dotted with factory buildings 
in course of erection and kept machinery builders 



Trusts versus The Public Welfare. 201 

busy making machines for their equipment; 
the home market was thoroughly canvassed and 
supplied, and foreign markets developed and im- 
portuned to purchase more largely of our man- 
ufactures. It was under their good and energetic 
management that our exports of manufactures 
attained their maximum value. Under combina- 
tion methods they have not reached that amount, 
but have fallen short of it from $23,000,000 to 
$30,000,000 annually. And theorists appeal to 
the people to favor trusts or combinations because 
the facilities they possess will enable them to sell 
more manufactures to foreign countries than our 
individual manufacturers sold them. Three suc- 
cessive years of reduced exports of manufactured 
goods under trust monopoly disproves the asser- 
tion. When the trusts sell their manufactures 
at less price than they were sold for before they 
monopolized the business of the country, whatever 
the reduction of price may be, the sum of it will 
be taken out of the wages of their employes and 
out of the price they pay for raw materials, their 
philanthropy will not be carried to the point of 
taking any part of it out of their prospective 
earnings. 

The cheapness that the friends of trusts 
heralded as the result of their control of our 



202 Trusts versus The Public Welfare. 

manufacturing industry is not apparent in any- 
thing they produce, higher prices were estab- 
lished when the combination system was intro- 
duced, and they have been inflexibly maintained 
to the present time. In the iron and steel man- 
ufacture, in particular consumers have had to pay 
extravagant prices fixed by the combination. 
Competition was promptly ended as the several 
independent iron and steel manufacturing com- 
panies adopted the scale of prices fixed by 
the combination as they dared not name lower 
prices and incur the ill-will of the great steel cor- 
poration. Prices were not based upon reasonable 
cost of raw materials and cost of labor, but ad- 
vantage was taken of the enormous demand for 
iron and steel to exact extreme prices. During 
the past twelve months, consumption being some- 
what reduced, a lower scale of prices was fixed 
by means of which consumers find some little 
relief from extortion, but the latest prices quoted 
are far above what they would be if the steel 
monopoly did not exist. Except only the amount 
of the reduction of price for the ton of iron ore, 
about one dollar, it costs as much to-day to pro- 
duce iron and steel as it cost when the highest 
prices prevailed. 

If the various iron and steel companies and 



Trusts versus The Public Welfare. 203 

firms that were merged into combinations during 
the past three or four years, and they in turn 
merged into the United States Steel Corporation 
in 1901, had been operated separately during 
that period, I doubt that any practical man will 
say that prices for iron and steel and their pro- 
ducts would have been advanced to anywhere 
near the figures they reached. Competition is a 
great regulator of prices, it tends to keep them 
down to a fair profit level, and at the same time 
maintain a liberal scale of wages and fair and 
just prices for raw materials. The iron and steel 
manufacturers could have made abundant and 
most satisfactory profits on much lower prices 
than named by the steel corporation, as they 
would not have had to extort immoderate profits 
from consumers to pay dividends on an enormous 
amount of watered stock. 

Before the absorption of our individual manu- 
facturing concerns by the combinations each of 
them had its corps of officers, salesmen, managers, 
bookkeepers and buyers, who were of the first 
importance in the conduct of the business, and to 
these men the upbuilding of our great manufac- 
turing industry is mainly due. Many of them 
are the peers of any man or set of men con- 
nected with the combinations. In the process of 



204 Trusts versus The Public Welfare. 

merging, nearly all of these officers, salesmen, 
etc., were gotten rid of and the duties they per- 
formed were centered in a few employes in one 
or two offices under one general management, and 
the product of the factories distributed in what 
was conceived to be a cheaper manner than was 
practised by the separate companies. As a result 
of this merging and of combination methods 
there are thousands of these capable and effective 
men walking the streets in idleness, non-pro- 
ducers and limited consumers. Is the public 
welfare promoted by the discharge of these men 
from place ? Their talents and energies, if em- 
ployed, would have added materially to the pros- 
perity of the country. The individual manufac- 
turer had his business and plant absorbed by the 
combination if he agreed to the terms proposed, 
or had his business destroyed and his plant ren- 
dered almost valueless if he declined them and 
stayed out. In either event his occupation was 
gone, and whether agreeable to him or not his 
remaining years were apt to be spent in idleness ; 
and, if he had sons in training to continue the 
business after his retirement, his hope of their 
succeeding him was dispelled, they had to seek 
other employment. A dream of independence 
was thus ended. The well-equipped superinten- 



Trusts versus The Public Welfare. 205 

dent, manager and foreman, the capable sales- 
man, bookkeeper and skilled workingman de- 
prived of employment by the trusts when they 
absorbed the plants and business of independent 
manufacturers faced a condition that was appall- 
ing. They had spent years of their lives in ac- 
quiring knowledge and experience in the one par- 
ticular line of business or work and to be barred 
from employment in it by the trust, the only em- 
ployer, left them almost hopeless of maintaining 
themselves and those dependent upon them, as 
they were unfitted by lack of knowledge to en- 
gage for service in any other gainful occupation. 
In the economy of the trusts these capable and 
worthy men had to give way, the operation of 
plants had to be conducted at less cost of product 
than formerly, which could only be done by a 
minimum of employes producing a maximum of 
goods. 

Understand the wage earners who were de- 
prived of employment, directly and indirectly, by 
the merging of our individual manufacturing 
concerns into powerful combinations, by the 
stopping of the building of manufactories, by 
the reduced demand for machinery, by the clos- 
ing, dismantling and destruction of factories, and 
by centering manufacture in a few favorably 



206 Trusts versus The Public Welfare. 

located plants, number into the thousands. What 
is to become of these skilled, experienced and 
valuable men who proved their high qualities in 
the work in which they had been employed for 
many years ? The trusts will not give them 
work to do, and they are not wanted in an occu- 
pation they are ignorant of and wholly unquali- 
fied to engage in. Are these men of brains, 
skill and experience in manufacturing to be 
forced to do the work of ordinary ignorant 
laborers ? Surely they are worthy of something 
better than that. The fate of the thousands of 
unemployed men of pronounced and proved 
worth whose situation is due to consolidation of 
industrial and commercial interests is of far more 
consequence to us than the success or downfall of 
any combination or aggregation of capital the 
country is cursed with, and should be so con- 
sidered by every right-thinking man in America. 
It should be plain to even an ordinary observer 
that combinations restrict employment and thus 
menace the public welfare. Let all who do un- 
derstand this come to a positive determination to 
spread that knowledge and do their utmost to 
have a halt called on the formation of other com- 
binations and insist that the power of those now 
in existence be confined to the narrowest limits 



Trusts versus The Public Welfare. 207 

possible by means of national legislation ^which 
alone can be effective to that end. The very 
foundation of our prosperity and well-being is 
now undermined by them, and the day is not so 
very distant when we will be overwhelmed in 
disaster resulting from their acts. 

Fully three millions of wage earners were idle 
during the major part of the four years ending 
with 1896, and many of them in want of the 
necessaries of life ; bank exchanges, which indi- 
cate the volume of business done throughout the 
country, averaged nearly twelve billion dollars less 
annually than the exchanges of 1892, and com- 
mercial failures during the four years reached the 
fabulous sum of $919,065,639. Worse than 
these things will come upon us if combinations 
are allowed to retain the power they now possess. 

The people have the power to compel their 
Representatives and Senators in congress to enact 
drastic laws for the control and regulation of 
trusts, or combinations, by which they will be 
shorn of their power to oppress, and unless the 
gentlemen who offer for those high offices solemnly 
pledge themselves to pass laws that will effectually 
remedy the combination evil, let the people make 
use of their power and withdraw their support 
from them and send men to congress who will 



208 Trusts versus The Public Welfare. 

obey their behests. Congress is not independent 
of the people, let the members of both Houses 
feel their power if laws are not enacted to protect 
them in their every right, especially in their right 
to do business without fear of molestation or 
destruction by aggregated wealth. Protect the 
independent manufacturer in his right to market 
the wares produced in his manufactory, and pre- 
vent under the severest penalties, even to the 
closing of the establishment of the offender, the 
trusts saying to jobbers and retailers, if you buy 
or offer for sale the product of independent 
manufacturers you will be barred from buying 
our goods. The merchant must have trust 
manufactures, as they constitute 80 or 90 per cent, 
of his stock of many articles and he is necessarily 
compelled to buy them, he no longer has the 
option to buy of whomsoever he pleases, and, 
therefore, has to obey the command of the trust 
or quit business. Prevent by law, under penalty 
of stopping the sale of trust manufactures if 
needs be, the cutting of prices below a profitable 
basis or below cost of production for the sole 
purpose of driving the independent manufacturers 
out of business, and not for the benefit of con- 
sumers. Such means as these have been used by 
combinations to destroy competition; they are 



Trusts versus The Public Welfare. 209 

clearly in restraint of trade and in violation of the 
anti-trust law. Unless combinations are restrained 
by national laws yet to be enacted from exercising 
the power they possess through vast capital and 
freedom from responsibility under liberal New 
Jersey, West Virginia and Delaware charters, 
they will ere long be bold enough to actually 
limit the number of working people who will be 
permitted to work in the manufactories and mines 
of our country, to establish such rates of wages 
as they may be pleased to allow, and fix whatever 
price may suit their peculiar views for raw mater- 
ials used in their business. 

While workingmen employed by combinations 
are now paid good wages, it is not from any 
philanthropic motive such wages are granted. 
The great prosperity pervading the country 
which insures a market at high prices for the full 
product of their factories, the fear that congress 
may be induced to pass laws to circumscribe their 
power and bring them under national control and 
supervision, and their desire to avoid trouble with 
their employes under existing favorable conditions 
for business, impels them to the exercise of that ap- 
parent liberality. What matters it if a high rate 
of wages is paid to the workingmen when com- 
petition is destroyed and the consumption of com- 
U 



2io Trusts versus The Public Welfare. 

bination manufactures is equal to production ? 
Whatever increase of pay is conceded them, that 
much, and more, is added to the selling price of 
the goods they produce and consumers pay it. 

From the combination point of view it is much 
better to pay high wages that are demanded, 
when as now and for several years past produc- 
tion and consumption are at the maximum, than 
to have the plant shut down by a strike and 
business stopped. Besides this, if the men are at 
work and satisfied with the wages paid them they 
are not apt to express their hostility to the com- 
bination form of business, to influence Represen- 
tatives and Senators to vote laws to bring them 
under national control. 

As said before, if industrial combinations had 
not been formed our individual manufacturing 
firms and corporations would have had more 
plants than are now in existence, employment 
would have been had for tens of thousands more 
wage earners, largely more business would have 
been done, manufactures would have been sold 
at less price, wages would have been as high as 
combinations pay (they are always high when 
labor is fully employed), and abundant net 
earnings would have been realized to pay big 
dividends on legitimate stock. 



Trusts versus The Public Welfare, 211 

The iron of oppression will enter the very soul 
of workingmen when the day of slack business 
comes, as it certainly will when some unpropi- 
tious condition develops. They will then feel the 
power of the combination, factories will be shut 
down and a multitude of working people will be 
discharged from employment who are apt to be 
without work and wages for a lengthened period 
and until the trust feels the time has come for the 
profitable resumption of operations. Throughout 
the period of slack business only the number of 
hands necessary to produce the actual quantity 
of goods ordered will be kept in service, all others 
will be laid off. As the number of independent 
manufacturing concerns is limited, and as they 
will naturally regard the interests and welfare of 
their own working people and keep them at work 
as long as there is sufficient business to warrant 
the operation of their factories, outside hands will 
have small chance of obtaining work in any of 
them. During this period wages will be reduced 
to the minimum, and, mark you, the trade union 
will be unable to successfully contend against the 
combinations as there will be competition of tens 
of thousands of workingmen eager for work at 
any price to keep want from their homes ; against 
that competition the union is absolutely powerless. 



212 Trusts versus The Public Welfare. 

Workingmen will yet face that condition and 
see the grim specter want enter their homes unless 
monopoly is crushed. Is it well to submit to 
trust tyranny that crushes all competition and 
restricts employment ? The interests of wage- 
earners should impel them to prompt action 
against the further combining of manufacturing in- 
terests, and to demand in no uncertain terms that 
existing monopolies be shackled. Just so long 
as aggregated capital has the power to destroy the 
business of a competitor and bankrupt him, in- 
dividual firms and corporations will not engage 
in the manufacturing business and working 
people will have only the trust to look to for 
employment. The danger is imminent, and the 
warning should be heeded ; there will be ample 
time to repent if it is not. 

Industrial combinations deprive a large num- 
ber of persons of the opportunity to employ 
their capital knowledge and experience in manu- 
facturing, they block the avenues of employ- 
ment to our wage earners, they destroy fair and 
honorable competition, impoverish a host of 
worthy and industrious people, and pour vast 
wealth into the coffers of the few, thus creating 
a plutocracy which is a dire menace to the pub- 
lic welfare. Every interest of the people and of 



Trusts versus The Public Welfare. 213 

the country calls aloud for their suppression. 
I have before me a list of 201 of the principal 
combinations formed in the United States that are 
capitalized at $6,958,697,518, of which sum 
$2,092,952,164 represents common stock that 
has no real value as there is not a dollar of cash 
or property possessed by them to sustain it. 
This common stock was issued and paid as a 
bonus to induce the merging of the properties 
and business of manufacturing firms and com- 
panies into combinations. Payment of stock 
was made, with very few exceptions, on the basis 
of $100 of preferred and an equal or greater 
amount of common stock of the combination for 
$100 of stock or property of the constituent 
companies ; in a few instances 70 per cent, of 
common stock was given as a bonus with the 
preferred stock, and in a few other cases an excess 
amount of preferred stock was paid with cash and 
common stock of equal amount. In fact, it can 
truthfully be said that much more than the 
$2,092,952,164 of common stock of this en- 
ormous capitalization has no true value, but divi- 
dends must be paid on it as well as on stock that 
is supported by cash and property, its owners ex- 
pect them as they establish a market value for 
the stock, and the combination management fix 



214 Trusts versus The Public Welfare. 

prices for their wares with an eye to big net earn- 
ings to pay dividends and yielda large sum for 
the surplus or reserve fund. The exacting of 
dividends and surplus fund on this great volume 
of watered stock by means of inordinate prices 
for manufactures is an outrage trusts perpetrate 
on a generous people. A tax should be laid and 
collected on all stocks of fictitious value, and 
double liability should attach to them. Let the 
law so provide, and the practise of issuing watered 
stock will cease. 

Cheapness of manufactures to the level of 
prices current in foreign countries it was con- 
tended by the friends of trusts would be achieved 
by means of the great capital and other facilities 
they possess which would enable them to produce 
goods at less cost than was possible in the past 
by independent manufacturers, and the people 
would be benefited by lower prices. If there is 
a trust-made article that has been sold at less 
price than quoted before the trusts were estab- 
lished our people have not discovered it ; higher 
prices have universally prevailed. Whenever 
trusts decide to, and do, sell their goods at less 
price than similar articles were sold by individual 
manufacturers in 1899 and in previous years it 
will be done at the cost of reduced wages and 



Trusts versus The Public Welfare. 215 

less price paid for raw materials they use. Wage 
earners and raw material producers constitute the 
great body of consumers in this country, if they 
are well paid for their service and the materials 
they supply we are assured of general prosperity 
to bless our people ; if their consuming power is 
abridged by low wages and unprofitable prices 
for raw materials the prosperity pervading the 
country will be brought to an end and the land 
will be filled with idle wage earners and distress. 
We do not want cheapness at such cost, it would 
be a curse to us. 

The exacting of inordinate prices by combina- 
tions that limit employment and depress the price 
of raw materials to a non-profitable or a money 
losing basis in order to swell the amount of their 
superabundant earnings is in the highest degree 
obnoxious/ and should be suppressed. Compare 
the average dividends of 6^ per cent, for 1902, 
5| per cent, for 1901 and 9.97 per cent, for 1900 
(the largest amount of dividends paid in any year 
since 1889), paid by 35 individual cotton manu- 
facturing companies of Fall River, Massachusetts, 
whose capital stock, based only on tangible assets, 
was $21,411,000, with dividends paid by the 
fabulously over-capitalized combinations and come 
to a knowledge of the extortion practised by these 
late creations. 



/ 



216 Trusts versus The Public Welfare. 

THE PEOTECTIVE TARIFF. 

The protective tariff was instituted to encour- 
age the investment of capital in the manufactur- 
ing business, so essential for our well-being, and 
to insure the payment of high wages to the 
working people employed in it. The magnificent 
manufacturing industry that we established which 
overshadows that of any other country in the 
world in value and volume of wares produced is 
the result of the operation of that law. Each 
year during the period of its upbuilding and 
diversification to 1900 numerous plants were 
built, giving employment to many thousands of 
workingmen in preparing materials for and in 
constructing the buildings and machinery, and 
at its end we were possessed of thousands of 
factories of all kinds in which millions of our 
people were at work at higher wages than were 
paid in the highest wage-paying country in Eu- 
rope, or anywhere else in the world. The suc- 
cessful establishment of this industry freed us 
from dependence upon foreign countries for a 
great many hundred millions of dollars' worth of 
goods we required annually, and thereafter we 
kept our treasure at home to pay wages to our 
own working people, and to use in developing 



Trusts versus The Public Welfare. 217 

the resources of our country to cause an increased 
demand for labor. 

This stupendous manufacturing industry of 
ours was built up by individual firms and com- 
panies, by individual capital, and there was no 
halt in its growth until since the formation of 
industrial combinations. While before these 
combinations came into existence many factories 
were built every year, since then the entire 
number constructed will not favorably compare 
with the number of new factories opened up 
for business in any one of many years prior 
to and including 1900. Contraction of manu- 
facture into as few plants as can be successfully 
operated has been, and is, the policy of the com- 
binations. Reduction of the number of factories 
operated means an immense reduction in the 
number of hands employed and the amount of 
wages paid. In this, one of the principal objects 
of the protective tariff is frustrated, and its 
other object, the paying of liberal wages to our 
working people, which was assured by its effective 
operation, will also fail as soon as there is an 
unfavorable change in business. 

The operation of individual plants in large 
number was what insured employment of the 
greatest number of wage earners and the main- 



218 Trusts versus The Public Welfare. 

tenance of a high scale of wages to make and 
hold this a prosperous country ; persons who do 
not now comprehend this will come to know it 
upon the occasion of the first halt in industrial 
activity when they will see factories promptly 
closed, thousands of employes without work to 
do and workingmen powerless to prevent a big 
reduction of wages. 

TRUST LEGISLATION. 

Trust legislation during the late session of 
congress was not of that scope and character to 
satisfy the people who look upon industrial com- 
binations as a menace to their welfare. They 
expected the congress to exercise the power it is 
vested with to enact rigid laws to curb trust 
oppression and tyranny and were disappointed in 
its not being done. The bill offered by Mr. 
Littlefield of Maine was of a character to bring 
combinations to near a satisfactory degree under 
national control, to the extent at least that the 
major part of the evils they inflict upon the 
people would have been remedied. The Act 
offered by Senator Hoar was far more forceful 
than any proposed in either House, and if it had 
passed would have effectually regulated the con- 
duct and affairs of combinations and destroyed 



Trusts versus The Public Welfare. 219 

their power to oppress the people and to mono- 
polize business ; both bills failed to pass, senator 
Hoar's bill was not considered outside the commit- 
tee to whom it was referred. 

Instead of enacting a law that would bring 
combinations under absolute control and super- 
vision of the National Government, a law was 
passed to facilitate the hearing and prosecution 
of suits against them before the courts under the 
anti-trust law of 1890 which long since was found 
faulty and inadequate to accomplish what was 
expected of it, and one other bill that passed the 
House, February 7th last, requiring corporations 
thereafter organized for the purpose of doing 
business among the several states and with foreign 
countries to file returns with the Interstate Com- 
merce Commission covering their articles of in- 
corporation, financial composition and condition, 
etc., and authorizing the commission, in its dis- 
cretion, to call for similar returns from existing 
corporations doing an interstate and foreign bus- 
iness, and making the payment of rebates on 
freight by common carriers punishable by fine. 

PUBLICITY OF COMBINATION AFFAIRS. 

In reviewing the testimony before the Indus- 
trial Commission, the objection of trust magnates 



220 Trusts versus The Public Welfare. 

to making public its condition, business, etc., were 
most pronounced ; they do not care to have the 
public informed of their methods of business, 
amount of watered stock they have issued, the 
actual financial composition and condition of the 
corporation as the price of the stock might be 
adversely affected, or anything else to enlighten 
the people on trust affairs. As said by a trust 
magnate, " the object of a trust is to keep people 
who have no business to know from knowing the 
secrets of the trust." The people are invited and 
urged to buy trust stocks, but, from the trust 
point of view, they have no business to know 
whether or not they have anything of value to 
support them. Mr. Havemeyer expressed him- 
self very pointedly upon this subject when he 
said to the commission : " They have got to wade 
in and get stuck, that is the way men are edu- 
cated and cultivated." 

We look over the industrial field to-day and 
find every important line of manufacture, except 
that of cotton goods, formed into powerful com- 
binations. Congress said in February last that 
corporations thereafter organized for the purpose 
of doing interstate and foreign business must 
make the public acquainted with their affairs. 
Why corporations thereafter organized ? What 



Trusts versus The Public Welfare. 221 

is there left of importance to combine except the 
cotton manufacturing companies ? The people 
are not as much concerned in what may here- 
after be combined as they are in existing com- 
binations. What is demanded is publicity of 
their affairs and condition, that is of far more 
consequence to them than statements of the 
composition, financial condition, etc., of combi- 
nations that may be formed at a future time. 
Investors should be protected by laws that will 
force present combinations to issue full and ex- 
plicit statements showing what they are com- 
posed of and their financial condition, so as they 
will have some knowlege of the value of stocks 
they are asked to buy, and the people will better 
understand the percentage of net earnings ex- 
acted from them to pay dividends on the mighty 
flood of watered stock they issued. Do you say 
the Interstate Commerce Commission has the 
power under the late law to compel existing com- 
binations to file with its statements showing 
their acts of incorporation and their general 
condition. If it should happen to please the 
commission to ask for them is it apt to advantage 
the public ? All such statements would be filed 
with the records and papers of the commission 
and they might appear in some one or more of its 



222 Trusts versus The Public Welfare. 

annual reports of limited circulation and read by 
few persons; is that publicity? It may be in 
the opinion of senators and representatives in 
congress, but to the great body of the people it 
is not ; publication through the medium of the 
annual report of the commission comes too late 
to benefit any one and is therefore valueless to 
protect any interests. 

Probably the most efficacious means of pro- 
tecting the people from the despotism of com- 
binations would be to require them to file sworn 
statements with the Interstate Commerce Com- 
mission giving the names and residence of their 
officers and directors, their authorized capital 
stock and the amount of preferred and common 
stock issued and the issue of bonds if any autho- 
rized ; the par value per share of the stocks and 
bonds issued and rate of interest they call for ; 
the names and location of the merged companies 
and partnerships ; the cash valuation of their 
tangible assets, and the terms upon which they 
were acquired, and whether payment was made 
in cash or in preferred and common stock, or 
part cash and part stocks or bonds, or if the con- 
solidation was effected by exchange of stocks and 
bonds on the basis of the appraised cash value of 
the property ; the terms of exchange to be fully 
stated. 



Trusts versus The Public Welfare. 223 

Require them to state whether or not the com- 
panies of which the combinations are composed 
were combinations of partnerships and corpora- 
tions before their absorption, and if they were 
have the statement show the capital stock of each 
of them and the cash value of their tangible assets 
as evidenced by their books at the time the 
original merging occurred and the price paid for 
them by the company taking them over, whether 
cash, or cash and stocks, or all stocks, and the 
amount that was paid for intangible assets and 
what they consist of. 

Require the combination to report when it 
began paying dividends and the amount paid an- 
nually since its organization, and whether or not 
dividends have been paid on both common and 
preferred stock and the amount paid on each. 
Also have them report their annual net earnings, 
the amount charged off for depreciation, repairs, 
etc., and the sum placed to the credit of the sink- 
ing fund and for what purpose ; in other words a 
full report of earnings and how they were ap- 
plied. The statement to show, further, the 
amount of cash paid into the treasury of the com- 
bination on its formation, how it was obtained, 
the sum paid to the promoter as his fee, whether 
cash or stocks or both, and the amount paid the 



224 Trusts versus The Public Welfare. 

syndicate of bankers or other persons who 
advanced cash to the organizers for combination 
purposes. Especially have the statement set forth 
the value of iron ore properties of the constituent 
companies as shown on their books at the time of 
merging and the prices paid for them by the com- 
bination. Then let it be the duty of the Inter- 
state Commerce Commission to notify the public 
that such statements are on file in its office and 
printed copies can be had upon application. 

Upon filing their statements with the Inter- 
state Commerce Commission, require each combi- 
nation to make public through the newspapers of 
the country the names of its officers, principal 
office, its capital stock, amount of stock issued, 
whether pref ered or common or both, amount of 
bonds, par value per share of each, cash paid in, 
cash value of its assets and what they consist of, 
the value placed upon intangible assets, net earn- 
ings, dividends paid, and the surplus on hand, a 
true statement of the financial condition of the 
company. And similar statements to be published 
quarterly or semi-annually thereafter. 

The great industrial combinations are now so 
firmly planted and in such overwhelming number 
with us that legislation of a nature to cause their 
sudden collapse would be calamitous. The repeal 



Trusts versus The Public Welfare. 225 

of duties on all trust-made goods would flood 
this country with foreign manufactures to our 
complete undoing, it would cause a great number 
of our factories to suspend operations and a 
mighty army of wage earners would soon be 
without employment and distressed, general bus- 
iness would be adversely affected and hard times 
would prevail ; rather than have these things 
occur we had better submit to trust domination. 
Trusts, or combinations, can be controlled and 
shorn of their power to do evil if Congress will 
pass laws to that end, but a thoroughly effective 
law will not be passed until the people become 
clamorous for it, let them demand such a law and 
they will get it. Unless trusts are deprived of 
their power to oppress and extort, reduction of 
duties to an extent that will prevent them from 
exacting inordinate prices for their goods is in- 
evitable, their insatiable greed makes it necessary. 
The lowering of duties under the conditions in- 
dicated on articles produced by trusts to a point 
to compel them to sell their goods at prices that 
will pay them a reasonable profit that will war- 
rant the payment of legitimate dividends upon 
an honest capitalization of their business and 
that will not rob consumers ; the repeal of the 

entire duty on iron ore and coal ; the destruc- 
15 



226 Trusts versus The Public Welfare. 

Hon of market value for their watered stock, 
and the passage of a law of the character of the 
one offered last January by Senator Hoar with 
the amendments proposed by him several weeks 
later for the control and supervision of trusts will 
divest them of their power. With this done there 
will be nothing left to encourage the formation 
of combinations, and it may bring about their 
gradual disintegration and the restoration of in- 
dividual partnerships and corporations in our 
manufacturing business to effect steady progress 
in our industrial development whereby employ- 
ment of the greatest number of wage earners is 
assured, exportations of manufactures increased, 
general business interests promoted, and honest 
prices established to free consumers of the extor- 
tion of monopolies. 

RESTRICTION OF THE CAPITAL STOCK OF CORPORA- 
TIONS. 

Another means by which the evils of combina- 
tion control of the business of the country could 
be remedied is limiting the capital stock of manu- 
facturing corporations doing business among the 
several states and with foreign countries to 
$10,000,000, or not to exceed $20,000,000, and 
every dollar of that capital stock to represent cash 



Trusts versus The Public Welfare. 227 

and actual property at its carefully appraised 
value. The officers, directors and stockholders 
of such corporations who have voting power in 
the management and control of their affairs should 
be prohibited from owning stock or interest of 
any kind in another corporation or firm engaged 
in the same manufacture, and forbidden under 
severe penalty from conspiring or entering into 
an agreement with others to regulate production, 
wages and prices, to pool their business, or to 
apportion territory to which the sale of their 
goods shall be confined, thus destroying compe- 
tition. 

INDIVIDUAL MANUFACTURING COMPANIES. 

Every well informed man approves of the 
formation of individual manufacturing corpora- 
tions because a number of persons invest the 
large capital necessary for their successful opera- 
tion on a large scale, a capital beyond the ability 
of partnerships to supply or its members willing 
to hazard in business. Individual corporations, 
which are honestly capitalized are a necessity and 
promote the public welfare, but when many of 
them are combined in one great and powerful 
company under one general management and 
control 80 or 90 per cent, or more of the output 



228 Trusts versus The Public Welfare. 

of a manufacture they constitute a monopoly to 
destroy competition and plunder the people ; they 
menace the public welfare. 

These industrial combinations must be regu- 
lated in no uncertain manner or they will regulate 
the commerce and labor of the country and the 
price of raw materials as well as the price of their 
productions to an extent to make us feel their 
tyranny to a greater degree in the future than it 
was felt in the past. 

COMBINATION METHODS AND RESULTS. 

The methods of combinations are shrewd and 
unscrupulous, they ruthlessly employ whatever 
means they deem necessary to attain their ends 
regardless of consequences to others. The end 
and aim of officers and directors, who are gen- 
erally the largest stockholders of the company, is 
the acquisition of great wealth for the benefit of 
a few persons. Their sense of right and justice 
is deadened in inordinate desire for wealth ; 
they depress the price of all materials they have 
to buy and extort extreme prices for whatever 
they have to sell, little consideration is given the 
millions who toil, and the public welfare is of 
small moment to them. 

As all this comes to the understanding of the 



Trusts versus The Public Welfare. 229 

people it engenders a feeling of bitterness and 
hostility towards employers and persons fortunate 
in the possession of riches, and rouses a spirit of 
socialism which is made apparent by its spread 
over the country in late years to lead to anarchy 
and violence when a period of business depression 
comes upon us and a host of wage earners are 
idle. 

Before the formation of powerful manufactur- 
ing combinations that have monopolized the busi- 
ness of the country wealth was more widely dif- 
fused in the United States than in any other 
country in the world, it was then possible for a 
capable man of small means to engage in and 
successfully conduct a business, acquire a com- 
petency, and rise to position, wage earners were 
almost universally employed, a high scale of 
wages obtained and peace, happiness, and plenty 
were in the homes of the people. The present 
condition of trust monopoly has changed all this. 
Wealth is now gathered by only the favored few, 
the man of small capital no longer has a chance 
to use it or to employ his talents for his advance- 
ment, however capable and ambitious he may 
be, he is not allowed to engage in business to 
conflict with trust interests, and the number of 
wage earners employed is limited to guard against 



230 Trusts versus The Public Welfare. 

over production and to insure a high percentage 
of profit. 

Whilst unparalleled prosperity has attended us 
during the past four years thousands of useful 
men have been without work because of trust 
methods. This condition has no precedent as 
the demand for many lines of manufacture has 
been throughout that period in excess of produc- 
tion and of a magnitude to warrant the employ- 
ment of all these idle people. 

Knowing trust methods of keeping in service 
only sufficient working force to produce just the 
amount of goods there is an assured demand for 
it is absolutely certain that a host of wage-earners 
now employed will become idle upon the advent 
of slack business, and that hands continued at 
work will be compelled to submit to a big reduc- 
tion of wages. Workingmen need not hope for 
the restoration of good wages with the resump- 
tion of business when employment is again of- 
fered them, they will then be more helpless than 
ever before, there will be but one employer, the 
combination, in each important line of manufac- 
ture and that employer will insist upon the pay- 
ment of such wages as the management may re- 
gard it to its interests to pay, and they will be 
in no condition to refuse what is proposed after 



Trusts versus The Public Welfare. 231 

a long period of idleness in which probably the 
savings o£ years were expended, or debt created, 
in supplying the wants of their families. 

Are our people insensible to the dangers con- 
fronting them in the creation of a plutocracy 
through the medium of industrial combinations 
that deny to individual firms and corporations 
the right to engage in the manufacture of such 
articles as they produce, and that limits produc- 
tion and employment to the end of increasing 
their earnings to swell the accumulated wealth of 
plutocrats? Is not that accumulated wealth a 
menace to our citizens of limited means who are 
desirous of engaging in the manufacturing busi- 
ness but are debarred because of the certainty of 
their destruction by aggregated capital? Is it 
not a menace to the rights and well-being of the 
toilers of the country ? Is there not danger in 
its possessors establishing a scale of wages that 
will impoverish and degrade the wage-earning 
class ? 

" 111 fares the land to hastening ills a prey, 
Where wealth accumulates and men decay." 

No writing, however great its length and scope, 
conveys a more forceful warning or puts so 
clearly the dangers confronting us by the forma- 
tion and operation of the combinations now con- 



232 Trusts versus The Public Welfare. 

trolling the manufactures of the country than 
does the following which is taken from an ad- 
dress delivered by Judge Grosscup, of Chicago, 
before the students of the University of Nebraska, 
at Lincoln, on the trust question. He said : 

" A widespread withdrawal by the people at 
large from general ownership in the properties 
of the country cannot but be fraught with the 
gravest danger. 

"Such withdrawal will diminish, if not destroy, 
popular interest in national prosperity ; for from 
those only who have a stake in prosperity can we 
expect great interest. It will kill off competi- 
tion ; for the competitor of the trust must itself 
be a trust, and there will be no independent field 
from which to recruit the means to create such 
competition. It will discourage still further the 
wage-earners in any hope of becoming part owner, 
and thus deepen and widen the existing gulf be- 
tween capital and labor. It will sap to its foun- 
dation the real strength of government ; for gov- 
ernment must be built on the interests, as well as 
the affections of the people governed. An in- 
dustrial system subject to such indictment is a 
rising menace to free government itself." 

THE END. 



AHH 11 1904 



